Posted in The Triad Market | Posted on 08-13-2014 | Written by Metrostudy News
August 2014: Metrostudy’s 2Q14 survey of the Triad housing market showed construction delays from the hard winter finally being mitigated, as quarterly starts increased to 632, up 14.7% over 2Q13. Annual Starts of 2,295 were observed in the Triad in 2Q14, up 27.6% from 2Q13. Annual Closings of 2,132 in 2Q14 was an increase of 287 homes from 2Q13. The winter delayed both home starts and completions, and contributed to the slower pace of closings as home buyers were unable to move into their homes while awaiting final completion of construction.
The 567 finished vacant homes on the ground in 2Q14 represent a 3.2 month supply, below the 7 year average of 5.1 m-o-s. As standing inventory in higher activity locations decline, under construction inventory has continued to increase to meet demand. The 978 homes under construction in 2Q14 represent a 5.5 months’ supply, and is a 17.1% increase from 2Q13. “Weather related delays in construction have caused some housing construction delays,” said Jay Colvin, Director of Metrostudy’s Triad region. “The inventory picture will be the focus for the market for the next two quarters. If inventories remain high, the starts projections for next year will be more subdued.”
The 11,194 lots on the ground in the Triad in 2Q14 are 11.6% fewer than 2Q13’s levels. This represents a 58.5 months-of- supply at the current start rate, yet even though this figure is well above the 18-24-month range that Metrostudy considers normal, there are shortages of lots in the highest demand locations, and that has driven limited new lot production.
“The oversupply of lots, many of which are bank owned or in the default process, has aided in resetting the price for lots, helping builders offer homes priced to reflect market demand,” said Colvin. “As higher activity neighborhoods near build out, existing lots offer a cost effective replacement alternative to new lot production, and allow builders to keep cost in line with market demand.”
See the Top 10 Builder List by Annual Starts based of Metrostudy’s 2Q14 Survey Findings
Townhomes – following national trends – are showing increased gains in the Triad new home market. Construction began on 148 townhomes in 2Q14, up 82.7% from 2Q13. Only 84 townhomes were closed on in 2Q14, slightly lower than the number in 2Q13. The slowdown in closings again is seen as weather related, as finished vacant inventory has dropped 12% year over year, while under construction inventory has increased 15%.
Vacant developed lots available for townhome product, is down 11.4% from 2Q13. At the current pace of starts, the total number of lots represents a 62 months-of-supply. Lot supplies are still high, but as with the overall trend, the most in-demand submarkets are seeing shorter supplies.
The job gains that the region has experienced so far in 2014 are very important to the local housing industry. However, for a sustainable recovery, this level of job growth needs to be sustained and avoid the choppiness that the market has experienced over the past several quarters. In order for the excess housing supply to be reduced, the region will need to experience greater job growth rates, as well as increased rates of population growth.
Guilford County captures the greatest share of new home activity in the Triad with 41% of the new home starts that began in the six counties that makes up the Triad market. The 993 new homes started in Guilford Co. over the previous 12 months was an increase of 26% over 2Q13. The 748 homes of total inventory represent a 9.9-months’ supply.
Forsyth County made up 27.74% of Triad new home activity through 2Q14. The county saw 699 new home starts for the four quarters ended 2Q14, an increase of 26.2% from the 2Q13 figure of 554. 686 new homes were closed in the trailing four quarters ending in 2Q14, up 12.1% from 2Q13. The county now has a 7.9 months’ supply of new homes based on the 449 inventory homes (models+finished vacant+under construction).
Alamance County continues to see the strongest growth in the Triad. The county started 371 homes in the four quarters ended 2Q14. This represents an 18% market share, which is up from 16% market share in 2Q13. The county has not only seen an increase in new home construction but demand as well. 330 homes were closed in the four quarters ended 2Q14, a 44.7% increase. Alamance is benefiting from a lack of entry level product in Durham and Chapel Hill, and the majority of the production gains have been near the Alamance and Orange county border.
Many markets across the country have been experiencing lot shortages in higher demand locations. When looking at the Triad, this same trend can be seen by looking at single family detachedneighborhoods averaging at least one start a month. The 44 subdivisions that meet these criteria make up 37% of total Triad activity measured by annual starts, and they have 411 inventory homes – 6.8 months-of-supply. These subdivisions have a 16.7 months-of-supply of vacant lot inventory, and many of the individual neighborhoods in this group are nearly built out. What this means for the Triad is price increases in higher demand subdivisions and a spreading out of activity to other neighborhoods with room for growth in similar locales. This is already happening, and the broadening out of the market is already taking place, and as long as job growth continues to be recorded in the region, the pace of growth in these neighborhoods is expected to continue.
For information contact: Jay Colvin @ 919- 314-0420
Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com
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