Posted in Inland Empire Market, Southern California Market | Posted on 08-11-2015 | Written by Metrostudy News
- 2Q15’s Annual Starts stand at 6,371, up 6.6% from 1Q15. Year-over-year annual starts experienced a 25.3% jump from 2Q14 levels.
- Housing affordability and loan qualifying still remains an issue as it pertains to new home development and sales.
- There is an approximate $126k difference between a median- priced new and median-priced resale home in the Inland Empire, due in part to limited inventory of new product that can directly compete with existing resale inventory in prime locations.
AUGUST 2015 – Metrostudy’s 2Q15 survey of the Inland Empire’s new home market shows that starts and closings collectively finished the quarter with Annual Starts increasing from 5,975 in 1Q15 to 6,371 in 2Q15 or up 6.6%. Year-over-year annual starts experienced a significant jump from 5,084 starts in 2Q14 or +25.3%. The current housing inventory monthly supply stands at 10.0 months, slightly higher than 9.3 months in 1Q15. For the same period a year earlier, housing supply stood at 8 months. Vacant Developed Lots decreased from 16,030 lots in 1Q15 to 15,563 lots in 2Q15, with monthly supply dropping from 32.2 months to 29.3 months during the same period. Annual Closings increased from 5,052 in 1Q15 to 5,267 in 2Q15, or up approximately 4.3%. Since 1Q15, quarterly closings have increased 6.8%.
“In general, the Inland Empire is experiencing a relatively stable economic environment,” said Dennis Handler, Director of Metrostudy’s Southern California region. “Optimism for gradual economic improvement remains strong and expected to continue through the end of 2015. Housing affordability and loan qualifying still remains an issue as it pertains to new home development and sales. Today, there is an approximate $126k difference between a median- priced new and median-priced resale home in the Inland Empire, due in part to limited inventory of new product that can directly compete with existing resale inventory in prime locations. However, the factors that fuel demand for new home sales are favorably projected to move steadily in a positive direction throughout the balance of the year and into 2016.”
The highest volume of 2Q15 starts occurred in the following price segments: $300k – $400k (38% of starts) and $400k – $500k (32%). Approximately 80% and 82% of housing inventory and VDL inventory falls below the $500k range, respectively.
Starts by County (1Q15 to 2Q15)
- Riverside County quarterly starts increased from 928 to 1,193 (+28.5%), and annual starts increased from 3,928 to 4,041 (+2.9%).
- San Bernardino County quarterly starts increased from 585 to 670 (+14.5%), and annual starts increased from 2,047 to 2,330 (+13.8%).
Closings By County (1Q15 to 2Q15)
- Riverside County quarterly closings decreased from 894 to 887 (-0.7%), and annual closings increased from 3,428 to 3,587 (+4.6%).
- San Bernardino County quarterly closings increased from 386 to 480 (+24.3%), and annual closings increased from 1,624 to 1,680 (+3.4%).
Vacant Developed Lot Inventory (1Q15 to 2Q15
- Riverside County VDL’s decreased from 8,406 lots to 7,862 lots (-6.5%). VDL monthly supply is 23.3 months.
- San Bernardino County VDL’s increased from 7,624 lots to 7,701 lots (+1%). VDL monthly supply is 40 months.
“Due to the recession, demand for new homes fell sharply, which forced builders to focus on selling off existing inventory before renewed builder confidence gradually reentered the market to ramp-up inventory again,” said Handler. “Within the past few years, employment gains have increased at a faster pace than the increase in housing supply, which now has created a situation of strong demand relative to limited supply, especially at the lower-to-middle range of the housing price spectrum. Consequently, permit activity for both single-family and multi-family construction has experienced a moderate upward trend.”
In 2Q15, the Inland Empire real estate market experienced similar characteristics to the broader Southern California market. Resale transactions ramped up due primarily to typical seasonal buying patterns. Albeit, the market is showing some strength with increased listings and closings, moderate price appreciation, shorter days-on-market, and higher absorption rates, but the question remains is this a trend that can be sustained throughout the balance of the year.
New construction annual starts and annual closings have continued to display further separation as closings maintained a fairly flat trend through 1Q15 and showed a slight upward shift in 2Q15. The pipeline of vacant developed lots that feeds housing inventory rests at just over a 29-month supply, while housing supply is currently at a 10-month supply and rising again. Since the 2Q14, finished vacant home supply has increased from three to four months, which indicates the market is still dragging due primarily to ongoing home buyer affordability issues and available product inventory at lower price points.
For information contact: Dennis Handler
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
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