TWIN CITIES HOUSING 1Q15: Despite Strength in the Economy, Regulation & Rising Costs are Pushing Buyers into the Resale Market

Posted in Twin Cities Market | Posted on 05-12-2015 | Written by Metrostudy News

  • Despite many signs of economic growth, the Minneapolis/St. Paul market’s 1Q15’s starts and closing numbers are the lowest in three years.
  • The annual rate of new home starts continues to trend down, with starts through 1Q15 down 9.4% from 1Q14’s numbers
  • Low levels of lot supply in some markets and submarkets have had the effect of restricting demand and increasing prices at a time when demand has declined and prospective buyers are price sensitive.

May 2015 – Metrostudy’s 1Q15 survey of the Twin Cities’ new home market shows that during the most recent twelve-month period, there were a total of 5,354 new housing units started, down 9.4% from the 1Q14 annual rate. The 996 units started in 1Q15 represent a decline of 9.0% compared to the 1Q14 starts total. The annual rate of closings is at 5,131 units, down 10.5% compared to the 1Q14 annual rate. The annual rate of new home starts has been steadily declining since the end of 2013, with a consistent drop of nearly 10% each quarter.

“Even in the face of strong job growth numbers, very low unemployment, and recent income growth, starts and closing numbers are at the lowest first quarter level in three years,” said Chris Huecksteadt, Director of Metrostudy’s Twin Cities’ market. “Rising construction costs, development costs, increased regulation (energy code and sprinklers for example) have all negatively impacted the potential for growth in the local housing market. In many markets and submarkets, the gap in price between an existing home and a newly constructed home continues to widen, ranging from $125,000 to $225,000. Although the size of a new home is typically significantly larger than that of an existing home, it may still be a bit much for the consumer to swallow, especially for the first time buyer or younger family that cannot afford a new home.”

Nearly every Twin Cities sub-market tracked by Metrostudy saw a decline in construction activity in the first quarter of this year compared to the prior year. Hennepin County is the most dramatic exception, with new home starts in the first quarter up 11.4% from the prior year. The low levels of lot supply in some markets and submarkets have had the impact of restricting demand and increasing prices at a time when demand has declined and prospective buyers are price sensitive.

As overall demand for new homes in the market has slowed, inventory has risen. Since mid-2013, the amount of standing new home inventory has increased 87%. Currently there is a 1.7 month supply of finished and vacant inventory in the Twin Cities market, well below the estimated normal level of 2.5 months, but up from the 1.0 month supply a year ago. With the recent downturn in the pace of new home construction (the rate of lot absorption), and a static level of vacant developed lot inventory, the months of supply for lots in the Twin Cities has, over the past three quarters, risen. The current overall supply of lot inventory stands at 47.0 months. Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to more acquisition and development activity. While the overall market shows a slight oversupply of lots, lots in many of the most desirable locations are becoming more and more scarce, leading builders to seek land and lot opportunities in those markets (driving up the price of land) as well as some secondary markets.

 “Although many reports from the field indicate decent levels of traffic – due likely in no small part to the annual Parade of Homes – sales and construction are below the levels expected in the first quarter,” said Huecksteadt. “An uptick was expected in the first few months of the year if for no other reason than to get homes started before the more onerous energy codes went into effect. With every increase in new home prices due to more regulation, a few more homebuyers are lost to the resale market. In fact, the first quarter of this year saw an uptick of 6.7% in resale transactions. Homes are selling, and will continue to sell. There is job growth and people need a place to live. The question is how big a slice of the pie will the new home market be able to cut.”

Rising home prices due to increased construction costs, land and lot price increases, and rising development costs have forced new home prices above levels that could maximize absorption. Many economists foresee the emergence of the first time home buyer and the millennials as an important component of the new home demand forecasts, however, many of our locations are priced above what these buyers can afford. The new home market is unable to reach the largest pool of potential buyers that are out there. Metrostudy does expect the new home market to rebound slightly in the second half of 2015, IF the economy continues to perform and grow at it’s current pace. The current forecast for construction in the Twin Cities market is at 5,500 units, which would represent only a slight – less than 1% – increase over 2014.

For information contact
Chris Huecksteadt
847-651-9080
chueck@metrostudy.com

About Metrostudy

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

About Hanley Wood
Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Mid-Year Slowdown Continues; Expectations for 2015 are Modest

Posted in Twin Cities Market | Posted on 02-19-2015 | Written by Metrostudy News

  • The year 2014 closed with a total of 5,490 New Housing Units Started in the Twin Cities, down 7.4% from 2013
  • We are seeing the first annual decline in starts and closings in three years, following two years of more than 25% annual growth
  • While economists are predicting a strong 2015 for the national housing market, the outlook for much of the MidWest is more modest, and we expect slightly inhibited growth in 2015

February 2015: During calendar year 2014, there were a total of 5,490 new housing units started (including single-family detached homes, townhome units, and duplex units), a decline of 7.4% compared to calendar year 2013. The 1,243 units started in the fourth quarter of this year represents a decline of 6.6% compared to the 4Q13 total. The annual rate of closings is at 5,303 units, down 5.7% compared to the 2013 total. The decline in starts and closings is the first in three years, following two years of more than 25% annual growth. Many builders have reported a slowdown in traffic through their communities this year and especially during the late summer and early fall months.

“The Twin Cities began to see a slowdown in the housing market in mid-2014, with second and third quarter starts down nearly 10%,” said Chris Huecksteadt, Director of Metrostudy’s Twin Cities region. “The fourth quarter of 2014 saw that trend continue with a 6.6% decline in new home starts and a 7.9% drop in quarterly closings. While the slowdown this year is not likely indicative of a major decline in the coming months, it does show that the recent uptick in activity was not sustainable. Rapidly rising home prices/land costs, a cautious consumer, and modest economic growth are the primary reasons for the recent slowdown in new home activity.”

At the bottom of the market, standing new home inventory was a major concern, with more than a 5.0 month supply in the overall market. As the rate of new home closings increased and builders focused on eliminating the excess inventory, the months of supply indicator declined. Currently there is just a 1.6 month supply of standing new home inventory in the Twin Cities market, well below the estimated normal level of 2.5 months. This has led some builders to be more aggressive about adding to the levels of inventory, with a 66.8% increase in finished and vacant new home inventory in the fourth quarter compared to the prior year.

With a relatively consistent pace of new home construction (the rate of lot absorption), and a declining level of vacant developed lot inventory, the months of supply for lots in the Twin Cities has fallen from a high of nearly 120 months in the second quarter of 2011, to a current level of 45.8 months. The 4q14 supply indicator has continued to rise due to the slowdown in construction activity. If Metrostudy excludes those lots in less desirable locations from the survey, the months of supply indicator drops even more sharply. Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to more acquisition and development activity. During calendar year 2014, 4,090 new lots have been delivered (the most in over seven years) with more entitlement activity also occurring.

“While the overall market shows an oversupply of lots, lots in many of the most desirable locations are becoming more and more scarce, leading to builders to seek land and lot opportunities in those markets – driving up the price of land – as well as some secondary markets,” said Huecksteadt.

Much of the news that impacts the new home market continues to sound positive; job growth continues, the unemployment rate has fallen, foreclosures have moderated, and the resale market continues to improve (a 2.9 month supply of resale inventory in the market!). However, the positive news is just not positive enough to sustain the growth in construction activity that was seen over the past two years. Economists around the country have forecast double-digit percentage growth for the housing industry nationally, with many market certainly poised to realize the growth forecast. Many markets in the midwest, however, have a more modest outlook for the year. Although many of the market’s fundamentals now point to the need for new home construction, there are still a handful of factors that will keep the local housing markets from reaching full potential.

“Rising home prices due to increased construction costs, land and lot price increases, and rising development costs have forced new home prices above levels that could maximize absorption,” said Huecksteadt. “Many economists foresee the emergence of the first time home buyer and the millennials as an important component of the new home demand forecasts, however, many of our locations are priced above what these buyers can afford.  Given these factors, Metrostudy expects a modest increase in new home demand in 2015. The worst may be behind us, but there are too many factors that will inhibit the Twin Cities from growing as rapidly as other markets around the country.”

For information contact
Chris Huecksteadt
847-651-9080
chueck@metrostudy.com

About Metrostudy

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

About Hanley Wood
Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

New Home Activity Slowing as 2014 Comes to a Close

Posted in Twin Cities Market | Posted on 11-19-2014 | Written by Metrostudy News

  • New Home Starts through 3Q14 are down 7.4% YoY
  • Builders and Developers are feeling a squeeze from a lack of quality lots in desirable locations
  • Homebuyers are sitting on the sidelines; Metrostudy revising its forecast downward for 2014.

November 2014: Metrostudy’s 3Q14 survey of the Twin Cities housing market showed the combination of rapidly rising home prices/land costs, a cautious consumer, and modest economic growth causing slowdown in new home activity. Through the first nine months of 2014, there have been a total of 4,258 new housing units started (including single-family detached, townhome, and duplex units), a decline of 7.4% compared to the first nine months of 2013. The 1,675 units started in the third quarter of this year represents a decline of 7.8% over the 3Q13 starts total.  The annual rate of starts currently stands at 5,593 units, while the annual rate of closings is at 5,425 units.  Both numbers represent a decline when compared to the annual rate of a year ago. Many builders have reported a slowdown in traffic through their communities this year and especially during the late summer and early fall months.

“The second and third quarters of 2013 were very good to homebuilders, with a significant uptick in starts and closings activity when compared to 2012; an increase of 35.0% during that six month span,” said Christ Huecksteadt, Regional Director of Metrostudy’s Twin Cities Region.  “The middle quarters of 2014 were down 9.2% when compared to the same six-month stretch in 2013. That being said, the numbers for second and third quarter of 2014 were better than those of any year since 2007, with the exception of last year.  While the slowdown this year is not likely indicative of a major decline in the coming months, it does show that the recent uptick in activity was not sustainable.”

Through the first nine months of 2014, the majority of counties surveyed by Metrostudy saw a decline compared to construction activity in the first nine months of last year.  Hennepin County still leads the way with approximately 19.6% of all new home construction in the Twin Cities market occurring there. Dakota County is number two, representing 16.0% of Twin Cities new home construction over the past year.      A few outliers saw a significant increase in starts activity this year: Chisago and Isanti counties, increasing from a combined 97 starts through the first nine months of 2013 to 254 starts in the first nine months of this year.

At the bottom of the market, standing new home inventory was a major concern, with more than a 4.0 month supply in the overall market. As the rate of new home closings increased and builders focused on eliminating the excess inventory, the months of supply indicator declined.

Currently there is just a 1.3 month supply of standing new home inventory in the Twin Cities market, well below the estimated normal level of 2.5 months.  This has led some builders to be more aggressive about adding to the levels of inventory, with a 21.6% increase in finished and vacant new home inventory in the third quarter compared to the prior quarter.

With a relatively consistent pace of new home construction (the rate of lot absorption), and a declining level of vacant developed lot inventory, the months of supply for lots in the Twin Cities has fallen from a high of nearly 120 months in the second quarter of 2011, to a current level of 43.7 months. The 3q14 supply indicator rose for the first time since 2011 due to the slowdown in construction activity.  If Metrostudy excludes those lots in less desirable locations from the survey, the months of supply indicator drops even more sharply. Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to more acquisition and development activity.  Through the first nine months of 2014, 2,224 new lots have been delivered with more entitlement activity also occurring.

Many of the most active market areas in the Twin Cities region are currently exhibiting a months of supply nearing equilibrium levels (24 to 30 months).       Hennepin County accounts for nearly 20% of all construction activity in the Twin Cities market and currently has a 21-month supply of lot inventory available. Dakota County, the second most active market in the Twin Cities region, currently has a 25-month supply of lot inventory.  While the overall market shows an oversupply of lots, lots in many of the most desirable locations are becoming more and more scarce, leading to builders to seek land and lot opportunities in those markets (driving up the price of land) as well as some secondary markets.

Much of the news that impacts the new home market continues to sound positive; job growth continues, the unemployment rate has fallen, foreclosures have moderated, and the resale market continues to improve.    However, the positive news is just not positive enough to sustain the growth in construction activity that was seen over the past two years. In addition, consumer confidence has waned in recent months, causing many to sit on the sidelines and wait things out. There just does not seem to be much urgency among prospective home buyers in the marketplace.

Metrostudy expects that the remainder of 2014 will see little to no improvement in the pace of new home construction and sales, with 2015 not promising much better. The market is not too far off from having supply issues impact the market’s potential for growth in addition to an economy whose temperature can be described as lukewarm at best, though improving.

“Given these factors, Metrostudy has revised it’s forecast downward to a range of 5,250 to 5,750 new home starts in 2014,” said Huecksteadt.  “Next year’s outlook will be heavily dependent upon growth in the local economy and builders’ and developers’ ability to deliver lots in desirable locations to meet potential new home demand. In addition, the housing industry desperately needs the consumer to jump back into the game. Modest growth from 5% to 10% is forecast for 2015. Economic growth and, maybe more importantly, consumer attitudes toward home buying, will be crucial for this forecast to materialize.”

For information contact
Chris Huecksteadt
847-651-9080
chueck@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters

New Subdivisions in the Midwest?

Posted in Chicago Market, Indianapolis Market, Twin Cities Market | Posted on 09-25-2014 | Written by Chris Huecksteadt

 

chris h for newsletter onlyA sure sign of a recovering housing market?  How about new lot development occurring for the first time in several years!  Surveying the Chicago, Indianapolis, and Minneapolis/St. Paul markets Metrostudy has noticed that new subdivisions are beginning to come through the pipeline.  Not a re-hashing of existing communities or a re-configuring of existing developments, but new land, being newly developed.  In 2010, in the Chicago market, there were a total of 383 new lots delivered.  Three HUNDRED and eighty three!!!  There are nearly ten million people living in this market and Chicago could only muster a few hundred new home sites during a 12-month period, a mere 30 new lots coming on line per month.  Through the first six months of 2014, there were a total of nearly 1,500 new lots delivered.  Not only that, but we are beginning to see proposals for new subdivisions that didn’t exist just a few years ago.  That may not seem like much in some markets, but here in the midwest, developers have been in hibernation for the better part of the past five years.  Development activity has not been as scarce in Indianapolis and the Twin Cities as it has been in Chicago, but nearly so.  In the Twin Cities, for example, a total of 964 new lots were delivered in 2010.  In 2013, there were 3,683 new lot deliveries.  Indianapolis has seen a total of 1,400 new lots delivered in the first six months of 2014, compared to just 650 through the first half of 2010.  As midwest markets have slowly recovered, builders and developers have recognized the need for fresh lot inventory.  Quality A and B lots are nearing critical levels of remaining inventory, fewer than 18 months of supply in all three markets.  Given the length of time necessary to bring new lots to the market, developers have been very busy over the past twelve-months in an attempt to keep the housing industry supplied with lots in the most desirable locations.  Look for continued new lot development activity in these markets for the next few years as we play catch-up in order to resupply these markets.

chris h

 

 

 

Twin Cities 2Q14 Housing Survey: Despite Pullback, Market Showing Consistent Growth

Posted in Twin Cities Market | Posted on 09-02-2014 | Written by Metrostudy News

  • The recent increase in new home demand has created a run on desirable vacant developed lots located throughout the metro; 2Q14 saw the lowest lot supply number since early 2007.
  • Almost 50% of all new homes started over the last 12 months were priced between $250k and $400k, the largest percentage of starts in that segment since Metrostudy began tracking the market;
  • While over 80% of the new starts are for single family homes, we expect that price and location pressures will drive consumers into townhomes and attached product lines.

September 2014: Metrostudy’s 2Q14 survey of the Minneapolis/St. Paul housing market showed slowing growth, as the market has been hit with multiple forces that have impacted new home construction.  Our survey showed 1,494 starts in 2Q14, up 35.6% from 1Q14 but down 10.4%from 2Q13.  The increase in activity is normal through the first two quarters as new home builds are generally either pulled forward into 4th quarter or pushed ahead to 2nd quarter. This winter’s brutal conditions impacted our starts numbers by approximately 10% in the 1st quarter so while there was an increase we expected to see a slightly larger jump in new home starts given the harsh winter.

The rate of annual new home starts for single-family and townhome units across the Twin Cities area was 5,765, up 5.3% over 2013 but a sizable drop off from the last couple quarters. The new home market is still continuing to show fairly consistent growth even with the recent pull back. Lingering impacts of the weak economy, flat wages and affordability concerns will constrain buyers.

“The increased demand for new homes has been facilitated by continued strength in the local resale market,” said Chris Huecksteadt, Regional Director of Metrostudy’s Minneapolis/St. Paul region.  “However, the significantly low level of existing homes on the market is causing some unanticipated inventory problems. Increasing home prices, low inventory and decreasing affordability has quelled momentum throughout the existing housing market causing some buyers to remain on the sidelines. The resale market will play a critical role throughout this year and could significantly impact new home sales.”

The majority of new activity remains strong throughout our top tier market areas, with the top 20 submarkets representing almost 60% of new home starts over the past 12 months. However, as lots prove scarce and increasingly costly throughout the “A” & “B” market activity is picking up throughout Otsego, Rogers, Savage, Chaska, Farmington, Waconia, Ramsey and Hudson as builders expand their footprint across the metro.

At the end of March 2014 there were 2,769 new housing units in inventory, up 136 from last quarter. Of that total, 2,035 units (73%) are under construction, 486 (17%) are finished vacant inventory and 248 (10%) are model homes. Housing supply fell compared to last year remaining very healthy at 5.9 months. Increased closings over the past twelve months helped push down our year end supplies to slightly below equilibrium levels of 6-7 months. Low housing inventory or more specifically low finished vacant inventory is one of the best indicators of the health of a housing market. Finished inventory months of supply sits at slightly above one month, which is actually below equilibrium, considered to be between 1.5-2.0 months. There are currently 20,690 vacant developed lots throughout the Twin Cities, a decline of 7.9% compared to last year.

“2Q14 represents the lowest lot supply we have seen since early 2007,” said Huecksteadt. “The recent increase in new home demand has created a run on desirable vacant developed lots throughout the metro region. Lot supplies across the seven county metro area are down to just 25.6 months, below pre-housing boom figures. As activity continues to increase we will need to see substantial lot deliveries across the metro in order to meet current demand.”

Lot pricing and availability is a concern throughout the top tier markets as land prices are quickly rising to pre-housing boom levels. New activity will continue to push outward in 2014 into our second and third tier market areas as land prices continue to rise.  Lot supplies still remain tightest in the $350,000 to $399,999 price segment as move-up buyers take advantage of low prices, strong inventory and low rates.

“Almost 50% of all new homes started over the last 12 months were priced between $250,000 and $400,000, representing the largest percentage of starts in that segment since Metrostudy began tracking the market,” said Huecksteadt. “Shifts in product size, style and needs have re-defined the new home market across the Twin Cities marking a return to a more balanced marketplace. Single-family homes continue to account for the majority of new home activity throughout the metro area, representing over 80% of all starts. However, townhomes and attached product should start grabbing market share, as location and prices remain challenging for single family development.”

The Twin Cities economy will likely continue to outperform the national economy, with unemployment remaining well below national levels, and net new job growth continuing to be positive.  Even as the market has slowed through the first six months of this year, healthy levels of price increases have occurred. The median sales price of an existing home is up 8.1% compared to last year, while the average sales price of a new home increased by 9.2%. The market has slowed, but it is in a much healthier condition today than during previous slowdowns in the market; new and existing home inventories are low and demand, relative to the levels of inventory in the market, is still high. Even with the slight decline in demand experienced over the first six months, there is still money to be made in the new home market in the Twin Cities.

For information contact Chris Huecksteadt @ 847-651-9080
email chueck@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Good Times Bad Times

Posted in Twin Cities Market | Posted on 07-08-2014 | Written by Ryan Jones

ryan jFor those of you out there who are fans of Led Zeppelin…  “In the days of my youth, I was told what it means to be a man, now I’ve reached that age, I’ve tried to do all those things the best I can. No matter how I try, I find my way into the same old jam.”

Good times bad times; I’ve used this phrase many times over the past six months to characterize the housing market.  The lyrics above are from the opening track on Led Zeppelin’s 1969 debut album, introducing the world to the greatest rock band ever.  This also happened to be the song I first heard this morning while getting ready to write this article. So there is the true tie in, which is in addition to the obvious tie in from the title of the track, which characterizes the housing market today.  Which could also characterize quite a few things out there… (Economy, Weather, Minnesota Sports, Politics) Ok, politics might be a stretch. Read the rest of this entry »

Minneapolis Housing Market Metrostudy 1Q14 Survey Results: Despite Harsh Winter, Housing Market Growing: Single-Family Development Faces Challenges

Posted in Twin Cities Market | Posted on 05-14-2014 | Written by Metrostudy News

May 14, 2014: The first three months of the year were pretty disappointing for new homebuilders, new homebuyers and frankly just about everyone across the Twin Cities. The brutal winter took its toll on all of us. The “polar vortex” couldn’t have come at a worse time, as momentum was building and confidence was improving. While the region’s woes can’t be tied to just cold weather, stress from higher land and home prices and a wavering “recovery” in the economy impacted home sales more than expected.

According to Metrostudy’s quarterly survey, 1,114 new homes were started in the 1st quarter, down 18.5% from 4Q13, and unchanged from 1Q13. The drop-off in activity is normal through the 1st quarter as new home builds are generally either pulled forward into 4th quarter or pushed ahead to 2nd quarter. We estimate that this winter’s brutal conditions impacted starts numbers by approximately 10%. The rate of annual new home starts for single-family and townhome units across the Twin Cities area is 5,980 new units. This is an increase of 16.2% compared to 2013 and the highest annual starts pace since 2008.

“Shifts in product size, style and needs have re-defined the new home market across the Twin Cities marking a return to a more balanced marketplace,” said Ryan Jones, Director of Metrostudy’s Twin Cities market. “Single- family homes continue to account for the majority of new home activity throughout the metro area, representing over 80% of all starts. However, townhomes and attached product should start grabbing market share, as location and prices remain challenging for single family development.”

Lot supplies still remain tightest in the $300,000 to $350,000 price segment as first-time and move-up buyers take advantage of low prices, strong inventory and low rates. Almost 50% of all new homes started over the last 12 months were priced between $250,000 and $400,000, representing the largest percentage of starts in that segment since Metrostudy began tracking the market.

Although Metrostudy is forecasting a much stronger 2nd and 3rd quarter, year over year could represent only a modest increase from 2013. While the numbers might not be as robust as we would like, the new home market is very healthy and builders should be focusing on balanced communities, with greater product offerings to meet demand across all buyer segments. The first-time and first-time move up buyer stands to gain the largest percentage of market share assuming builders are able to deliver product that meet demand. New lot deliveries will increase precipitously in 2014 and 2015 as builders and developers adjust to the new market conditions.

“The new home market is continuing to show consistent growth with annual increases in new home demand occurring in each of the last two years,” said Jones. “However, there appears to be a little adjustment compared to the growth we experienced in 2013, and while several factors are likely to blame, 2014 could see more modest sales pace. Lingering impacts of the weak economy, flat wages and affordability concerns will constrain buyers. Additionally, continued labor, materials and lot shortages will put pressure on new home builders’ already tight bottom lines – pushing new home prices up at time when confidence is shaky.”

As we thankfully head into spring with warmer weather, brighter skies and improved confidence, an uptick in sales is anticipated. Builders are gearing up with new communities and new products which should keep pace at or above last year. Strong fundamentals across the Twin Cities area will likely continue helping drive new construction.

For information contact: ryan jones @ 952.426.0754
Email ryanj@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Twin Cities New Home Growth Showing Signs of Slowing as Affordability Weakens

Posted in Twin Cities Market | Posted on 01-29-2014 | Written by Metrostudy News

(Minneapolis, MN – January 29, 2014) Strong fundamentals across the Twin Cities area have pushed new home construction up 31% over 2012. 2013 finished up the year strong with builders pushing out new homes at a very healthy clip. This is 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.

According to Metrostudy’s quarterly survey, 1,387 new homes were started in the 4th quarter, down -25.6% from last quarter, but up +7.4% from 4Q12 when 1,292 homes were started. “The drop-off in activity is normal for the 4th quarter as the school year begins and temperatures plummet. While typical, the pullback is slightly lower than we were expecting raising concerns regarding the impact the economy, price increases and rate increases are having on the market,” said Ryan Jones, director of Metrostudy’s Twin Cities Market.

“The majority of new activity remains strong throughout those top tier market areas, with the top 20 submarkets experiencing a 24% jump in starts compared with 2012. However, as lots prove scarce and increasingly costly throughout the “A” & “B” markets activity is picking up throughout Otsego, Rogers, Savage, Chaska, Farmington, Waconia, Ramsey and Hudson as builders expand their footprint across the metro,” said Jones.

At the end of December 2013 there were 2,596 new housing units in inventory, down 154 from last quarter. Of that total, 1,969 units (76%) are under construction, 419 (16%) are finished vacant inventory and 208 (8%) are model homes. Housing supply fell compared to last year remaining very healthy at 5.5 months. Increased closings over the past twelve months helped push down our year end supplies to slightly below equilibrium. Equilibrium for housing inventory months of supply is between 6-7 months. Low housing inventory or more specifically low finished vacant inventory is one of the best indicators of the health of a housing market. These units which have been completed but remain vacant at the time of our survey currently sit at just 419 finished vacant units on the ground. Finished inventory months of supply sits at slightly below one month, which is actually below equilibrium, considered to be between 1.5-2.0 months. These numbers should come up a little over the next couple months as more housing units near completion and sales slow.

There are currently 22,274 vacant developed lots throughout the Twin Cities, representing a decline of 9.6% compared to last year. (10,900 vacant developed lots throughout the metro seven counties, a decline of 9.9% compared to last year). 4Q13 represents the lowest supply number since early 2007. The recent increase in new home demand has created a run on desirable vacant developed lots located throughout the metro. Lot supplies across the seven county metro area are down to just 26.9 months, down below pre-housing boom figures. As activity continues to increase we will need to see substantial lot deliveries across the metro in order to meet demand. “Lot pricing and availability is a concern throughout the top tier markets as land prices are quickly rising. Demand will continue to push outward in 2014 into our second and third tier market areas. Builders are increasing their land supply and should be able to capitalize on the growth that will occur in the coming years,” said Jones.

“The Twin Cities economy looks to remain strong and the new home market is positioned to grow right along with it. While our pace could slow a little in 2014 we expect continued growth in new home activity throughout the year. Price increases may need to be adjusted if the economy weakens or rates change dramatically. Proceed with caution this year as sales might not come as easy as 2013. Stay tuned,” said Jones.

About Metrostudy

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

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

The Twin Cities housing market continues to grow in the third quarter

Posted in Twin Cities Market | Posted on 10-30-2013 | Written by Metrostudy News

(Minneapolis, MN – October 30, 2013) Strong fundamentals across the Twin Cities area have pushed new home construction up another 40% over recent years. This is 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.

According to Metrostudy’s quarterly survey, 1,875 new homes were started in 3Q13, up +10.8% from 2Q13, and +33.9% from 3Q12 when 1,400 homes were started. For the second straight quarter the Twin Cities housing market surpassed 1,500 new home starts for the quarter. “With winter quickly approaching housing production will continue to see solid growth over the next couple months, before pulling back come January,” said Ryan Jones, director of Metrostudy’s Twin Cities Market.

At the end of September 2013 there were 2,766 new housing units in inventory, up 234 from last quarter. Of that total, 2,085 units (75%) are under construction, 430 (15%) are finished vacant inventory and 251 (10%) are model homes. Housing supply fell compared to last year remaining very healthy at 6.1 months. Low housing inventory or more specifically low finished vacant inventory is one of the best indicators of the health of a housing market. These units which have been completed but remain vacant at the time of our survey currently sit at just 430 finished vacant units on the ground. Finished inventory months of supply sits at slightly below one month, which is actually below equilibrium, considered to be between 1.5-2.0 months. “These numbers should come up a little over the next couple months as more housing units near completion and demand remain strong,” said Jones.

There are currently 22,446 vacant developed lots throughout the Twin Cities, representing a decline of 12% compared to last year. (10,909 vacant developed lots throughout the metro seven counties, a decline of 18.1% compared to last year). 3Q13 represents the lowest supply number since early 2007. Lot supplies across

the seven county metro area are down to just 27.2 “As activity continues to increase we will need to see substantial lot deliveries across the metro in order to meet demand. Lot pricing and availability is a concern throughout the top tier markets as land prices are quickly rising,” said Jones.

“The Twin Cities economy looks to remain strong and the new home market is positioned to grow right along with it. We will likely end 2013 up right around 6,000 new home starts, 30% higher than 2012 and twice the amount from 2011. Stay tuned,” said Jones.

For information contact:
ryan jones @ 952.426.0754
email ryanj@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

The Twin Cities housing market maintains growth in the second quarter of 2013

Posted in Twin Cities Market | Posted on 07-17-2013 | Written by Metrostudy News

(Minneapolis, MN – July 17, 2013) The Twin Cities economy looks to be very strong and the new home market is positioned to grow right along with it. This is 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 Twin Cities current employment estimates indicate that employers added approximately 49,500 new jobs to their payrolls over the past 12 months.  “Education and Health Care related firms remain one of the strongest and fastest growing employment sectors adding (+12,700) new jobs in the last year,” said Ryan Jones, director of Metrostudy’s Twin Cities division. The local unemployment rate continues to remain one of the lowest in the country, amongst major metropolitan areas, currently sitting at 4.7%.

According to Metrostudy’s quarterly survey, 1,730 new homes were started in 2Q13, up +54.3% from last quarter, and +46% from 2Q12 when 1,184 homes were started. “While the rate of growth in new construction over the past twelve months was likely being held back by the lingering impacts of the stagnant economy, the next twelve months will present new challenges as lot and labor shortages will likely constrain the new home construction market,” said Jones.

At the end of June 2013, there were 2,765 new housing units in inventory, up 13% from last quarter. Of that total, 2,139 units (77%) are under construction, 395 (14%) are finished vacant inventory and 231 (8%) are model homes. Housing supply fell compared to last year remaining very healthy at 6.7 months. Finished inventory months of supply sits at slightly below one month, which is actually below equilibrium, considered to be between 1.5-2.0 months. “These numbers should come up a little over the next couple months as more housing units near completion and demand will remain strong,” said Jones.

There are currently 22,882 vacant developed lots throughout the Twin Cities, representing a decline of 12% compared to last year. (10,812 vacant developed lots throughout the metro seven counties, a decline of 18.1% compared to last year). “Lot supplies across the seven county metro area are down to just 28.2 months, down below pre-housing boom figures. As activity continues to increase we will need to see substantial lot deliveries across the metro in order to meet demand,” said Jones.

“Those in the housing industry need to continue planning for the next 5 – 10 years so that the market can grow successfully from within.  We will likely end 2013 up over 6,000 new home starts, twice the amount from 2011. Challenges exist, but the Twin Cities trend will continue to remain positive,” said Jones.

For information contact:
ryan jones @ 952.426.0754
email ryanj@metrostudy.com

About Metrostudy

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.

About Hanley Wood

Hanley Wood, LLC is the premier media, event, information and strategic marketing services company serving the residential, commercial design and construction industries. Through its operating platforms, the company produces award-winning digital and print publications, Newsletters, websites, marquee trade shows and events, Market Intelligence data and strategic marketing solutions. The company also is North America’s leading publisher of home plans.