Housing: Anatomy of the Rebound

Posted in Atlanta Condo Market, Austin Market, Chicago Market, Denver - Colorado Springs Market, Las Vegas Market, Naples - Ft. Myers Market, Naples Condo Market, Nashville Market, National Housing Market, Northern California Market, Phoenix - Tucson Market, Raleigh - Durham Market, Tucson Market, Twin Cities Market | Posted on 01-31-2013 | Written by Brad Hunter

Metrostudy’s new study of housing in markets across the country puts hard numbers to the housing recovery, and provides a detailed look at differences in the trajectory among regions.  The data (collected at the end of calendar year 2012, and newly analyzed) indicate extreme variance among markets and submarkets, with some markets’ single-family production up 90% or more versus a year ago.

Starts of detached homes rose by an impressive 46.9% from year-end 2011 to year-end 2012, and the rebound is starting a virtuous cycle, providing a much-needed boost to personal incomes, which in turn translate into still-higher demand for homes.

It is important to understand the forces that are driving construction activity higher as well as those that are restraining gains in some areas.  In some markets, there are land constraints that work to the advantage of the builders who have lot positions and ongoing projects in those submarkets, keeping the number of head-on competitors low.  Additionally, the builders that have lot positions in lot-constrained submarkets are able to push prices up much more easily, and they have a strong incentive to do so, because:  (1) they can make more profit by selling the homes at higher prices, and, (2) they don’t want to run out of lots too quickly.

Read the rest of this entry »

Homebuilders Join Resale Housing Market Recovery

Posted in National Housing Market, Tucson Market | Posted on 11-01-2012 | Written by Ben Sage

(Tucson, AZ – October 29, 2012) The resale housing market has been on the mend in Tucson since early in 2012, and now the new-home market is beginning to see some improvement.

New home starts in the Tucson area numbered 1,593 during the 4 quarters ending 3Q12, which is up 26% from 3Q11. Starts in the third quarter alone, which are based on Metrostudy’s lot-by-lot survey of all new construction subdivisions from Red Rock to the Cochise County line, numbered 486 units. This is up from 364 starts in 3Q11 but down slightly from 509 last quarter (2Q12). “Homebuilding activity is up substantially from last year, especially over the last six months. This appears to be due to a stronger resale market as existing home supply is down from last year while prices are up,” said Ben Sage, director of Metrostudy’s Arizona division.

Regarding new-home supply, inventory figures are quite healthy, indicating that builders are constructing homes only to meet current demand. New-home inventory, which includes under construction homes, has gone up this year from 841 units at the end of 2011 to 996 in 3Q12. Importantly, however, the number of new-home inventory units that are finished but vacant has fallen from 318 at the end of 2011 to 263 at the end of the third quarter, a 17 percent decline. “The increase in total new-home inventory reflects the uptick in construction, while the decline in finished vacant inventory means families are moving in as soon as the homes are completed,” said Sage.

“Foreclosures are still quite high, but they are down 26 percent from last year (year-to-date August). Read the rest of this entry »

New and resale home inventory on the decline in Tucson, prices stabilizing

Posted in Tucson Market | Posted on 04-30-2012 | Written by Metrostudy News

(Tucson, AZ – April 30, 2012) Many of the local housing and economic indicators in Tucson are starting to improve but more recovery is needed before it will significantly impact homebuilding, according to Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

New home starts in the Tucson area numbered 1,320 in during the 4 quarters ending 1Q12, which is down 14% from 1Q11. Starts in the first quarter alone, which are based on Metrostudy’s lot-by-lot survey of all new construction subdivisions from Red Rock to the Cochise County line, are actually up 8% from 1Q11 to 297 units. “New home starts appear to be leveling off as builders are reporting a slightly better spring selling season than last year. Resale inventory is declining, but there is still a great deal of distress in the housing market, which is likely to usurp a sustained homebuilding recovery this year,” said Ben Sage, director of Metrostudy’s Arizona division.

Regarding new-home supply, inventory figures are reasonably low, which indicates that builders are constructing homes only to meet current demand. Total new home inventory, which includes all homes that have been started but are yet to exhibit any evidence of occupancy, fell to only 806 units at the end of 1Q12. The number of new inventory units that are finished but empty, many of which are under contract or sold, fell 27% from one year ago to only 318 units. This is the lowest reading since Metrostudy started surveying the Tucson market in 2003. The 318 units represent 2.6-months of supply, “which is acceptable,” said Sage, “especially given the current real estate environment. The relatively low count of new homes in inventory means builders will not be able to satisfy any increase in demand from their inventory. Even a slight bump in new-home demand will result in more housing starts.”

“Foreclosures are still quite high, but they are falling and should continue to do so. The decline in resale supply is now at a level that is actually below historical norms, which should result in home price stabilization. If Tucson can begin to recover economically with some job growth this year, home values will grow and the homebuilding industry should see some gains in 2013.”

For information contact:
ben sage @ 480.756.9300
email bsage@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

Starts By Community
Rancho Sahuarita used to dominate the Tucson market and was one of the top communities in the country in terms of new home starts a couple of years ago. It lost its #1 position in Tucson to Saddlebrooke last year, but it is now back on top with 107 starts during the year ending 1Q12. Below are the top Tucson area communities ranked by annual new-home starts.

  1. Rancho Sahuarita – 107 starts
  2. Saddlebrooke* – 94 starts
  3. Rancho del Lago – 78 starts
  4. Dove Mountain – 76 starts

Starts By Submarket
On an annual starts basis, the Northwest submarket is the most active homebuilding market with 313 starts over the last four quarters (Figure 4). This is up 13 percent from the previous year, one of only two areas that gained during the period. Here are the Metrostudy submarkets ranked by 1Q12 annual new-home starts:

  1. Northwest (Oro Valley and Marana east of I-10) – 313 starts
  2. Far South (Sahuarita and Green Valley) – 251 starts
  3. Southeast (Vail and Corona de Tucson) – 249 starts
  4. Southeast Pinal County – 161 starts
  5. West (West of I-10 from Star Pass to Marana) – 104 starts
  6. Near South (west of Davis Monthan to I-19) – 85 starts
  7. Southwest (West of I-19 along Ajo Hwy. and Valencia Rd.) – 57 starts
  8. Northeast (East of Oracle Rd. and north of Rillito River) – 56 starts
  9. Central/East (East of I-10, south of Rillito River to Valencia) – 44 starts

Note: Metrostudy also surveys Cochise County, which generated 183 annual starts ending 1Q12

Active Adult Community Starts
Of the 1,320 starts in the metro area, 219 were in active-adult communities, which have garnered a larger share of the overall market growing from 6% of starts 4 years ago to 17% currently. The top active adult communities ranked by 1Q12 annual starts are:

  1. Saddlebrooke* (94 starts)
  2. Quail Creek (59 starts)
  3. Four Seasons at Rancho del Lago (50 starts)

* Includes Saddlebrooke Ranch and The Preserve

Autumn and Migration = Housing Demand? (follow me on this one….)

Posted in Economy, National Housing Market, Phoenix - Tucson Market, Tucson Market | Posted on 11-07-2011 | Written by Ben Sage

Ahhh … autumn. This is my favorite time of the year. The brutal summer is over, there is less yardwork, and football is in the air. I also love Thanksgiving because it’s rich with history and faith, it’s family oriented, you can expect a large meal, and there is … well … football. It helps that my family generally stays home for Thanksgiving, because, while it’s great to see extended family, travel can be a little stressful, especially during one of the most traveled weeks of the year. While we like to stay home at Thanksgiving, autumn means many species of birds are packing their bags for warmer climates. Approximately 1,800 of the world’s 10,000 bird species migrate. It is not fully known what drives these creatures to embark on such a journey, but it is generally believed to be availability of food, habitat, and weather. According to National Geographic, the compulsion is so strong that it leads the bar-headed goose to fly 5,000 miles over the Himalayas from Mongolia to India. During the mountain stage, the geese fly as high as 29,000 feet and make it over the mountains in a single eight-hour hop. This makes them the world’s highest flying species (though vultures have been known to reach 30,000+ feet, but not regularly and only by soaring on an updraft).

Bar-headed geese, Photograph by Darlyne A. Murawski, National Geographic

Bar-headed geese, Photograph by Darlyne A. Murawski, National Geographic

The longest distance migration is believed to be by the Arctic Tern, which travels over 9,000 miles from its arctic breeding grounds in the north to Antarctic non-breeding areas in the south, and back again … every year. That distance would be “as the crow flies” – pun intended – but they take such a zigzag route that some end up flying 44,000 thousand miles roundtrip to take advantage of prevailing winds, weather, and food sources. If you think about the seasonal differences between the northern and southern hemispheres, it is always summer for the Arctic Tern who sees more daylight than any living creature. Lastly, the award for longest flight during migration goes to the Bar-tailed Godwit, which is known to fly 7,000 nonstop miles from Alaska to New Zealand. It can travel nine days without food, rest, or water, and it loses more than 50 percent of it’s bodyweight during the journey. It is able to enter some sort of sleep-state while flying, and it apparently uses the sun and stars to navigate. THAT is impressive.

Of course, humans tend to migrate too, but trends are generally over longer periods of time and in one direction. During the industrial revolution from the 18th to 19th century there was a huge population shift from the country to the cities. In 1800 only 5 percent of the U.S. population lived in cities, but this number grew to almost 50 percent in 1920. Today it is 80 percent. As for the southwest, road building and dam construction in the mid 1900s literally paved the way for increased economic opportunity in the desert regions, and growth of the military/industrial complex during and after World War II brought many workers to the region. Of course, numerous people move to this region for the warmer climates and the quality of life. Over the last 90 years, population in the southwest United States has grown 1500 percent, compared to 225 percent growth for the nation as a whole.

Arizona has certainly benefited from both these trends over the years (urbanization along with southwesterly migration), as its population growth since 1920 is outpaced only by Nevada. Locals know that we get much of our growth from California. This is largely due to Arizona’s more business-friendly environment and lower cost of living. Since the recession, however, there have been some notable changes in state-to-state migration patterns. The table below shows the top net population changes within the U.S. from 2005 to 2007.
image1
As we were coming off the highs of the last growth cycle, the net flow of population from California to Arizona was second only to the New York to Florida pattern (this excludes international migration along with population change due to births/deaths). It is apparent from the table above that New York and California are having a hard time keeping people. During this period, for instance, for every 2 people that went to California from Arizona, 5 went the opposite direction. Much of California’s outflow is economic in nature, while New York’s outflow is characteristically due to the retiring population. As you might have guessed, though, the patterns and figures have changed since we reached the depths of the recession. The table below shows the net population flow between states from 2007 to 2009, recently updated by the Census Bureau.
image2
Note several changes in the top ten, including the outflow of population from Florida to states like Georgia and North Carolina. Also, Texas’ relative economic stability led strong population flows to the Lone Star state, especially from California and Florida. Note furthermore the smaller numbers compared to the previous table, as mobility has been greatly reduced due to either homeowners’ inability to get out of their current residence or lack of economic opportunity in other states. Contrary to popular belief, America’s populace has become less mobile over recent decades, but this trend fell to new lows during the Great Recession.

As for Arizona, the table below shows the top ten states from which we got most of our population flow from 2007-2009. California is easily number one, but the flow declined by 60 percent compared to the 2005-2007 period. It is apparent that we are dependent on this west coast growth for economic expansion. Interestingly, migration from Minnesota and Washington (among several other states not shown) actually grew, but the numbers are not particularly significant. Basically, while Arizona continued to have a net positive flow of population from other states, net migration growth went down by 46 percent from nearly 100,000 in 2005-2007 to a little over 50,000 from 2007-2009. This decline was dominated by the change in the net flow of migrants from California, accounting for two-thirds of the change.
image3
So what does the future hold for Arizona? Will we get back to previous growth rates, particularly from California? In a recent New York Times article, William Frey of the Brookings Institution predicted that relocation rates will pick up, especially for young adults, when new housing and job opportunities begin to reappear. While people are staying put with a wait-and-see approach to the economy, “There is going to be pent-up demand for migration,” according to Mr. Frey. Agreed. Despite what appears to be slightly negative population migration in Arizona for 2009 and 2010, the table is being set for a return to typical migration patterns. The Phoenix area is adding jobs and the unemployment rate is declining steadily. Resale inventory is tightening up across the U.S., and home prices are stabilizing, even in Phoenix. Households are itching to move on to greener pastures. I am not predicting a huge wave of new population in the short term, but if we can start 6,000 units with no population growth, even a trickle of new migrants will impact the homebuilding industry next year. In my mind, the new home market will surprise the industry to the upside in 2012. While we look up and see migrating birds this autumn, next year – if we look laterally – we’ll start to notice a few more moving vans.

BACKGROUND
Ben Sage, Director of Metrostudy’s Arizona Region, has been researching and analyzing housing markets for seventeen years. He has prepared hundreds of market studies in various cities around the country for numerous product types. His knowledge and experience combined with Metrostudy’s accurate and reliable information have enabled Ben to advise many Arizona real estate firms in their risk assessment, decision making, and strategic planning. Ben has also been a resource for such publications as the Arizona Republic, East Valley Tribune, Phoenix Business Journal, Inside Tucson Business, Arizona Daily Star, Arizona Builder Magazine, Bloomberg News, and the Wall Street Journal. He can be reached at (480) 756-9300, option 3 or bsage@metrostudy.com, or visit www.metrostudy.com.

Challenges to continue, but job growth could sustain Tucson’s new-home market

Posted in Tucson Market | Posted on 02-08-2011 | Written by Metrostudy News

(Tucson, AZ– February 1, 2011) The Tucson housing market continues to face challenges, but expanded job growth may allow housing starts to continue at the same pace this year, according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

The Tucson area started 2,005 homes during 2010, down 8 percent from 2009. Annual new home closings are close to bottoming out as builders closed 2,295 units last year, down 19 percent from 2009. “It has been a difficult operating environment for builders as the lower mortgage rates have not made up for the loss of the homebuyer tax credits,” said Ben Sage, director of Metrostudy’s Arizona region.

Total new-home inventory (including under construction inventory) declined in 4Q10 to 1,184 units, the lowest figure since Metrostudy began tracking Arizona real estate in 2003. A little over half of the builder inventory is finished and vacant, which is typical of most markets that Metrostudy is tracking. Much of the inventory is already under contract, but new-home supply among builders was large enough to contribute to the sharp drop in fourth quarter starts.

During 2010, Tucson metro added 2,200 jobs. This is a very modest increase by historical standards, but it represents a nice turnaround from the 18,800 jobs that were lost in 2009. “It will be a while before we recover all 30,000 jobs lost during the recession, but it looks like Tucson is starting that process,” said Sage.

“Our expectations were that starts would be flat or slightly up in the Tucson market last year, but activity slowed modestly instead. It is surprising that the extremely favorable mortgage rates did not offset the housing swoon in 3Q and 4Q10. Foreclosures issues will continue into 2011, but expanded job growth may allow starts in the region to remain level,” said Sage.

For information contact:
ben sage @ 480.756.9300
email bsage@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.