Posted in Inland Empire Market, Southern California Market | Posted on 05-20-2015 | Written by Metrostudy News
- Metrostudy’s 1Q15 survey shows the Annual Starts rate in the Inland Empire is up 23.1% YoY;
- Affordability concerns are keeping potential buyers in the rental market, with rental occupancy rates averaging 95% across Southern California
- The difference between new and resale median prices is over $135,000 in the Inland Empire, with less than 30% of home buyers currently able to afford a new home
May 2015 – Metrostudy’s 1Q15 survey of the housing market in the Inland Empire showed the annual starts rate at 6,002, up 6.8% from 4Q14. Year-over-year annual starts experienced a significant jump from 4,875 starts in 1Q14 or up 23.1%. The current housing inventory monthly supply stands at 9.5 months, not much different than 4Q14, but it is 2.3 months higher than 1Q14. Vacant Developed Lots increased from 16,597 lots in 4Q14 to 17,002 lots in 1Q15, with monthly supply dropping from 35.5 months to 34 months during the same period. Annual Closings increased from 4,795 in 4Q14 to 5,059 in 1Q15, or up approximately 5.5%. Since 4Q14, quarterly closings have decreased from 1,490 to 1,296 or down 13%.
“The highest volume of 1Q15 starts occurred in the following price segments: $300k – $400k (37% of starts) and $400k – $500k (28%),” said Dennis Handler, Director of Metrostudy’s Southern California region. “Approximately 81% and 85% of housing inventory and VDL inventory falls below the $500k range, respectively.
Starts by County (4Q14 to 1Q15)
Riverside County starts increased from 702 to 945 (+34.6%), and annual starts increased from 3,790 to 3,956 (+42.6%).
San Bernardino County quarterly starts increased from 490 to 583 (+19%), and annual starts increased from 1,827 to 2,046 (+12%).
Closings By County (4Q14 to 1Q15)
Riverside County closings decreased from 1027 to 910 (-11.4%), and annual closings increased from 3,246 to 3,444 (+6.2%).
San Bernardino County closings decreased from 463 to 386 (-16.6%), and annual closings increased from 1,549 to 1,615 (+4.3%).
Vacant Developed Lot Inventory (4Q14 to 1Q15)
Riverside County VDL’s increased from 8,804 lots to 8,995 lots (+2.2%). VDL monthly supply is 27.3 months.
San Bernardino County VDL’s increased from 7,793 lots to 8,007 lots (+2.7%). VDL monthly supply is 47 months.
In 1Q15, the Inland Empire real estate market experienced similar characteristics to the broader Southern California market, as resale transactions dropped off considerably. However, resale inventory remains fairly strong at a 6-month supply and prices of both new and resale homes have displayed positive appreciation. Unfortunately, the average days on market for resale homes remain in the 115-day range with no foreseeable change in this trend. New construction annual starts and annual closings have continued to display further separation as closings maintained a fairly flat trend through half of 1Q15 while starts began to accelerate. Since 2011, annual starts and closings have more-or-less been in-line with each other offering positive energy and confidence for the builder community. In addition, inventory levels have begun to creep up, specifically finished vacant home inventory. Overall, the Inland Empire market appears to have lost some momentum due to a drop in consumer demand and limited affordable product supply.
“Fundamentally, the economic conditions are favorably moving in the right direction due to consistent job growth and lower unemployment, low interest rates, and growing consumer confidence,” said Handler. “Affordability and number of qualified buyers are still primary factors that have a significant impact on the new home buyer market. The difference between new and resale median prices is over $135,000 in the Inland Empire, with less than 30% of home buyers currently able to afford a new home, which combined with limited product inventory at the lower-end of the price spectrum, has major implications on the home building industry through the balance of 2015. Alternatively, the rental market continues to benefit as rental rates are expected to remain stable with occupancy rates averaging 95% across Southern California.”
In general, the Inland Empire is experiencing a relatively stable economic environment. Optimism for gradual economic improvement remains strong and expected to continue through 2Q15. The job market is also maintaining a steady flow of new jobs with unemployment rates continuing to move closer to the national average. Interest rates are still low, with no foreseeable increase in the short-term, and the housing market is also operating at a stable and manageable pace.
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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