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.

HOUSTON HOUSING 1Q15: Despite the Slowdown in the Oil Industry, Prices and Demand Remain High

Posted in Houston Market, Texas Market | Posted on 05-12-2015 | Written by Metrostudy News

  • Through 1Q15, Metrostudy’s survey shows annual new home starts at over 29k, down slightly from 4Q14 but still the second strongest total since 3Q08
  • The current annualized rate of home closings is the second highest since 1Q09
  • Although the supply of finished vacant homes has increased 22% from a year ago, this number is a mere 30% of FV inventory in 2Q07, the height of speculative building

Metrostudy’s 1Q15 survey of the Houston new home market showed continued strong performance, with builders starting construction on 6,655 new homes, a slight increase over 4Q14 but about 6.9% lower than 1Q14. On an annualized basis, starts stand at 29,852, about 1.6% below 4Q14 and the strongest rolling four quarter total since 3Q08. The annual pace in starts declined for the first time since 2011 as region felt the first effects of the slowdown in the oil patch.

“While annual starts have outpaced annual closings since 2012, closings have increased steadily over the last thirteen quarters, only to fall 2.7% over Q1 2014,” said Scott Davis, Director of Metrostudy’s Houston region. “In the first quarter, area builders closed 6,383 new homes, bringing the annualized total to 28,106. Despite the dropoff in closings in the first quarter, the rolling four quarters total still represents a 7.3% increase year-over-year. The current annualized rate of new home closings is the second largest since the first quarter of 2009 when builders were still liquidating their inventory as quickly as possible. Needless to say, the sales occurring today are of a much healthier nature.”

Metrostudy’s first quarter survey reflects 11,916 homes currently under construction; about 1,000 more than a year ago, and which equates to 7.1 months of supply. Conversely, the supply of homes sitting finished and vacant has increased 22% from a year ago to 3,945 units, which represents the highest level of inventory since Q1 2012. Interestingly, this is a mere 30% of the number of finished vacant units available in the second quarter of 2007, the height of speculative building. The number of model homes has risen to 803 from 788 a year ago.

“Houston’s resale market closed on 83,224 single-family homes from Mar 2014 through Mar 2015, falling just shy of the level in Jan 2015 but represents the second largest volume of resale closings since we’ve been compiling the statistics back to 1990,” said Davis. “Despite the slowdown in energy, the pace of closings remains ahead of Q1 2014. The pace of home closings remains constrained, with listings at 19,286 in March 2015, even though it is up from 17,857 last year. The addition of almost 2,000 properties in listing inventory has increased the months of supply to 2.8, which remains significantly below the six month mark, which is typically considered a healthy equilibrium level. Even with a weakened economic background, Houston is currently not able to meet housing demand.”

MLS transactions of resale homes reflect a median price of $204,000 in the fourth quarter, nearly 7% higher than a year ago, and the third highest median home price since 1990. Prices on existing product have held better than most expected, driven by tight supply. We would expect that prices in the resale market should return to historical levels as sales slow as pressure on the market is lessened by the slowdown in the energy sector.

Deliveries of Vacant Developed Lots are starting to catch up to the pace of absorption. By the end of the quarter, we had supplied about 1,020 more lots than starts. During the first quarter, 7,675 new lots were delivered to the market while 6,655 new homes were started. Year to date, 28,835 lots have been delivered, while builders have started construction on 30,325 new homes during the same time frame. Houston’s relative supply of VDL sits at 14.9 months, well below the 10 year average of 25 months. Moving forward, lot availability will continue to be a key factor for the growth of the Houston housing market.

In 2015, several significant trends are important for the Houston housing market. Mortgage rates should continue to remain low, factors that have contributed to the rapid increase in home construction costs should abate, and lot supply should increase significantly and these should encourage new home sales. But these trends will be overshadowed by concerns over the rapid decline in the price of oil. At present, consumer hesitation over the influence of oil prices is the greatest risk to the market; job increases from oil and gas producing companies have comprised less than 10% of the job increases in Houston over the last year. However, the longer that oil stays below $55/barrel the greater the negative impact it will have on the Houston housing market.

“Tight supplies of available housing historically lead to home price appreciation, and prices in housing are rising quickly in both new and resale homes,” said Davis. “On top of this, builders are coping with an overall increase in the real cost of building a new home in the market. Builders currently face fierce competition for a limited number of available lots to build on in suitable locations. In addition, builders are paying higher costs for materials and facing shortages in labor. These factors have contributed to a bottleneck which has limited growth in starts and has extended delivery times.. Consumers have little choice but to pay higher prices or continue to rent at ever increasing rates, as inventories in both the new home and resale markets are quite thin. The result of all these factors is strong appreciation in home values, which Houston has already been observing as median closing prices for resales in Houston are up over 5% since last year and new sales are up 4.6%.”

For information contact:
Scott Davis
713-622-9909 x132
sdavis@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.

NATIONAL HOUSING MARKET: Metrostudy Releases 1Q15 Home Building Outlook

Posted in In The News, National Housing Market | Posted on 05-11-2015 | Written by Metrostudy News

Total U.S. Housing Starts Projected to hit 1.1 Million in 2015

 

WASHINGTON, D.C. (May 11, 2015) — Metrostudy, a Hanley Wood company, announced today the release of its first quarter 2015 Home Building Outlook detailing housing construction trends nationwide.  The Home Building Outlook is the platform for Metrostudy’s national and local forecasts, spotlighting the Top 100 Housing Markets across the United States.

The first quarter update indicates U.S. Housing Starts are expected to advance gradually to hit 1.1 million this year, with 715,000 of those being single family homes as defined by the Commerce Department.  Multi-family housing starts are expected to increase to 385,000 as the rental market continues to exhibit strength.

New Home Sales are expected to increase 18.8% to 519,000 this year, up from 437,000 in 2014.  The best overall new home markets are Denver, Austin, and The Villages (FL) in terms of health and local new home sales forecast.  The southern U.S. dominates in terms of sales volume, with the largest new home markets expected to be Houston, Dallas, and Atlanta.

“We continue to forecast a gradual recovery in construction,” says Brad Hunter, Chief Economist of Metrostudy.  “Our forecast of eventual rising new home demand is founded on a reversion to long-standing typical behavior patterns.   One of these relates to the “doubling-up” of households during and after an extended recession.  But we are now seeing some evidence that those households are beginning to split apart once again, increasing demand for housing.  As rising rents eventually hit the pain point, more people will begin to consider home ownership again.”

Metrostudy produces the Home Building Outlook to provide the building industry with visibility into local residential construction activity as well as official national forecasts. 

About Metrostudy

Metrostudy, a Hanley Wood company, is the largest provider of comprehensive research and insight for the real estate industry. Builders, developers, banks, manufacturers, retailers and many other industries all rely on Metrostudy’s data and analytics to support strategic business decisions at the local, regional and national market level.  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, visithanleywood.com.

See more at: http://www.hanleywood.com/pressroom/metrostudy-releases-q1-2015-home-building-outlook#sthash.IQIEeAnF.dpuf

CHICAGO HOUSING 1Q15 – Rising Costs & Regulation are Pushing Buyers to the Resale Market

Posted in Chicago Market | Posted on 05-10-2015 | Written by Metrostudy News

  • The annual rate of new home construction through 1Q15 was the highest since 4Q08
  • Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to elevated levels of acquisition and development activity.
  • Rising prices have prevented the new home market from reaching the largest potential pool of buyers – Millennials and first-time buyers

May 2015 – Metrostudy’s survey of the twelve county Chicagoland region shows that a total of 5,748 new units were started in the twelve month period ending 1Q15, an increase of 15.9% compared against the previous year. This is the highest annual rate of new home construction since 4Q08! The annual rate of closings also increased in the first quarter, to 5,228 units, a 6.7% increase compared to the prior year. A closer look, however, shows that the annual rate actually fell from the prior quarter, down 0.4%

The 923 units started in the first quarter of this year represents an increase of 6.8% over the 1Q14 starts total. This number is the most started in a first quarter since 1Q08. The number of homes closed in the first quarter of this year, however, saw a slight decline, down 2.3% compared to the 1Q14 total. There were 966 new homes closed in the first quarter of 2015, compared to 989 units closed in the first quarter of 2014.

“Even with the recent uptick in job growth, the slowdown in closings gives cause for concern,” said Chris Huecksteadt, Director of Metrostudy’s Chicagoland region. “Reported slowdowns in buyer traffic over the past several months also make the increased rates of construction appear unsustainable. With new development beginning to occur again, and the slow disappearance of below market value lots, it is likely that the share of new home closings as compared to all home sales will begin to decline.”

Following years where the market expanded into the outlying counties of the Chicagoland area, the past five years have seen the market consolidate around Cook and the traditional collar counties. Cook County saw more new home starts (even excluding the vertical market) than any other county in the region.

“With the continued increases in construction activity, and the slowdown reported by builders of traffic, it is not surprising that inventory has risen over the past few quarters,” said Huecksteadt. “Metrostudy expects the rate of construction to continue to remain flat, as traffic and contract activity has been lackluster. In fact, don’t be surprised if more incentives are offered to buyers by builders in an attempt to absorb the standing new home inventory and generate activity in the market place.”

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 Chicago market has fallen from a high of nearly 250 months in the third quarter of 2011, to a current level of 97.2 months (we’re below 100!!!). Increases in construction activity, even in the outlying areas of the market, have continued to drive the months of supply indicator downward. 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 elevated levels of acquisition and development activity.

Even though the number of new home starts continues to steadily increase, closings have slowed and the amount of traffic reported by many builders has been spotty. Even in the face of strong job numbers, there seems to be little excitement among prospective homebuyers in the market place. The cost to deliver new homes in the market continues to rise and with every increase in new home prices due to costs and regulation, a few more homebuyers are lost to the resale market. 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 look to 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. Given these factors, Metrostudy forecasts new home starts to range from 5,600 to 5,800 units in 2015, no to only slight growth,” said Huecksteadt. “Strong wage growth combined with continued job growth in the 1.5% to 2.0% range could positively impact this forecast. It remains to be seen, however, if the economy can sustain strong numbers for more than a three to six month period.”

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.

SAN ANTONIO HOUSING 1Q15: New Home Closings Increase In First Quarter

Posted in San Antonio Market | Posted on 05-10-2015 | Written by Metrostudy News

May 2015 – The San Antonio housing economy had a good first quarter even though the annual rate of single-family housing starts did not increase since the end of last year. Significant rainfall during the first part of this year limited the completion of new lots and slowed starts overall. This leads to higher expectations for an increase in new home construction activity in the second quarter that should push our starts level a few hundreds units higher and taking care of some pent up demand.

Metrostudy’s 1Q15 survey of the San Antonio housing market shows the annual starts pace relatively unchanged from 4Q14, but is up 8.8% above last year’s 1Q14 level, an increase of 752 units. The annual rate of starts as of 1Q15 is 9,326 units, which is down 3 units from last quarter. Metrostudy’s 1Q15 drive survey recorded 2,200 housing starts in the San Antonio area, approximately the same number of starts in the first quarter of 2014. In addition, Metrostudy’s research indicates there were 2,236 new home closings in the most recent quarter, a 13.3% increase compared to 1Q14. The annual rate of new home closings as of 1Q15 registered at 8,810, a 6.1% increase from 1Q14 and up 3.1% from 4Q14.

“New home activity by price range shows that the San Antonio market’s loss of its affordable product continues, with only 33% of all new housing starts priced below $200,000,” said Jack Inselmann, Director of Metrostudy’s San Antonio region. “Two years ago the affordable segment recorded a 51% share. All price ranges above $200,000 maintain good rates of growth.”

Job growth in San Antonio has been excellent over the last few years which is fueling housing demand to its higher construction levels and for higher priced homes. Job growth in the San Antonio MSA has grown an average of 28,500 jobs per year over the last three years and is currently generating its best numbers since 2005. Moving forward the level of success in the homebuilding industry will depend on the level and type of job growth.

For information contact:
Jack Inselmann
210.710.3635
jacki@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, 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.

INDIANAPOLIS HOUSING 1Q15 – 2015 Starts Slow, Tight Lot Supply May Dictate Future Development

Posted in Indianapolis Market | Posted on 05-10-2015 | Written by Metrostudy News

  • 1Q15 New Home Starts were somewhat disappointing compared to the strong numbers that closed out 2014
  • New home inventory and lot availability are low overall, which might restrict growth in the new home market
  • We are seeing strong growth in Hendricks and Marion Counties, while Hamilton County activity is down 18.3% from 1Q14

May 2015 – Metrostudy’s 1Q15 survey of the Indianapolis housing market shows that over the past twelve months, there were a total of 4,288 new housing starts in the region, down 0.6% compared to the prior year. The 820 units started in the first quarter of this year also represent a decline of 0.6% over the 1Q14 starts figure. The annual rate of closings currently stands at 4,221 units, up slightly from the prior year (1.9%). Based on the slowdown in starts it is likely that closings will begin to level off as well. Builders were fairly aggressive about closing out inventory in the latter half of 2014 and first quarter of 2015.

“Following a strong finish in 2014, the first quarter of 2015 was somewhat disappointing,” said Chris Huecksteadt, Regional Director of Metrostudy’s Indianapolis office. “Although a single quarter does not a trend make, the decline in activity shown in the first quarter is somewhat discouraging as we start the new year. Below average job growth and an apathetic consumer are giving cause for concern as we head into the heart of the selling season in the Indianapolis market. New home inventory is relatively low and the amount of available lot inventory in the market is also low overall, which may also be restricting any possibility for growth in the new home market.”

Hamilton County, which accounts for nearly 41% of all new home construction in the Indianapolis market, saw the largest decline in construction activity, down 18.3% from the 1Q14 number of new home starts. Hendricks and Marion County both increased, with 160 and 113 new home starts respectively in the first quarter (up 58.4% and 20.2%). With the tight supply of lots, demand will likely follow where the lots are. As many desirable locations begin to build out in Hamilton County, it will be interesting to track the consumer as they consider other locations in the greater Indianapolis area.

Currently there is just a 1.6 month supply of standing new home inventory in the Indianapolis 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 slight increases in finished and vacant new home inventory occurring throughout 2014. With the slowdown in the new home market, caution has been in evidence as the amount of finished and vacant inventory declined in the first quarter of this year.

“With a relatively consistent pace of new home construction, and a declining level of vacant developed lot inventory, the months of supply for lots in Indianapolis has fallen from a high of nearly 80 months in the second quarter of 2009, to a current level of just 26.0 months,” said Huecksteadt. “For four straight quarters now the months of supply indicator has been below 30 months. If Metrostudy excludes 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.”

Even though the number of new home starts continues to steadily increase, closings have slowed and the amount of traffic reported by many builders has been spotty. Despite modest job growth and a slight increase in incomes, there seems to be little excitement among prospective homebuyers in the market place. The cost to deliver new homes in the market continues to rise and with every increase in new home prices due to costs and regulation, a few more homebuyers are lost to the resale market. In fact, the first quarter of this year saw an uptick of 2.2% in resale transactions (again, the pace new home sales is slowing). Rising home prices due to increasing construction costs, land and lot price increases, and rising development costs have forced new home prices above levels that could maximize absorption. The new home market has begun to find it difficult to reach the largest pool of potential buyers that are out there.

Given these factors, Metrostudy forecasts new home starts to range from 4,000 to 4,200 units in 2015, no to only slight growth. Strong wage growth combined with sustained job growth in the 1.5% to 2.0% range could positively impact this forecast. It remains to be seen, however, if the economy can sustain strong numbers for more than a three to six month period.

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

Relieved Builders Say Goodbye to Lackluster 2014 and Hello to Consumer Segmentation in 2015

Posted in Phoenix - Tucson Market | Posted on 03-02-2015 | Written by Metrostudy News

  • Despite high expectations, 2014 New Home Starts were down 14% from 2013
  • Affordability is a concern as new communities come on line at higher prices; it is not clear if condos and infill will be the affordable solution but the market should be watched
  • Builders should not expect much organic growth through the market and should be focusing on the consumer if they want to larger share of the starts

March 2015: According to the Metrostudy 4Q14 survey, home starts, attached and detached, in the Phoenix area numbered 10,140 over the last four quarters, down 14% from 2013.  This was a disappointment as initial expectations were for a substantial increase for 2014. The largest declines (25.7%) continued in Pinal County, followed by the Southeast Valley that saw a 15.9% decrease. The competition in the Southeast contributed to the decrease as more competitors have entered this area in hopes of gaining more market share. The Northeast Valley continues to see the strongest starts growth year over year with an increase of 15.3% (820 starts). Closings over the last four quarters are also trending down to 10,329; though we had hoped that closings would remain flat for the year we finished out with a 10.6% decrease.

MLS single family listings have started a slight downward trend down 8% to a total of 21,484 when looking at December over December. Though still higher inventory numbers than we saw through most of 2013 it appears that sellers are still in the market as sales ended the year up 9%. The market is currently holding 3.6 months of supply and days on market have been holding steady at 88 days over 4Q 2014. With room to grow in the resale market the undersupply of homes has been under our equilibrium of 5-6 months since 2009.

Annual New Home Starts and Closings

Phoenix 4q14

For 2014, single family annual MLS sales numbered 72,402 units, down 11% from one year ago, but it still represents a large volume of transactions. The median price of a single-family home sold through the MLS rose slightly reaching $204,000, a 3% increase from twelve months ago. Despite what was expected median price did increase slightly from the previous quarter. Condo sales are on the watch list though annual sales were down 5% and inventory is also down slightly. We did see strong median price appreciation up 13% to $129,400.

“With new homebuilders entering the market in the next year it will be interesting to see what occurs in the infill market and what effect that will have on resales specifically condos,” said Rachel Cantor, Director of Metrostudy’s Phoenix market. “We expect to see strong numbers coming from projects in the Central Valley and Scottsdale area. But the question is will buyers be able to pay the higher prices we expect to see in these new communities and how deep is the pool of buyers interested in the product.”

SE Valley is still drawing a majority of the starts and the competition landscape already filled to capacity will see more additions in 2015. The upside is that buyers are still in the market. The first two weeks of 2015 has seen traffic and sales in the Gilbert market come in very strong and we are currently tracking traffic at the same pace we saw in the beginning of 2014 which makes us cautiously optimistic. The competition is constantly changing and builders should now begin looking and start thinking about replacement projects as well as consumer segmentation. With little growth expected in 2015 market share will be gained by beating out the competition.

As we see the SE Valley is drawing the largest amount of starts and carrying only 18% of VDL supply for the market. The overall inventory of vacant developed lots (VDL), or finished lots, continued to rise in Q4. The total of 55,136 vacant lots includes all product types. Though VDL inventory has seen minor growth year over year currently up 6% from last year it has been a consistent growth throughout the year. Through most lots are in the outlying areas of Pinal County and the SW Valley reviewing existing positions and timeline for lot deliveries is going to be critical in 2015. Planning lot deliveries and subdivision close-outs in highly competitive areas like the SE Valley will help builders begin to review purchases for lots in 2016 and 2017.

“2015 is currently the year of watching population, wages, jobs, and migration very closely,” said Cantor.  “Any changes in these areas could make or break our housing industry. With little to no affordable housing left it is not a surprise that apartment and condo growth seems to be on the rise, though it is not yet clear if apartments or condos will become how we now define affordability. Phoenix is not alone in the quest for affordable product – several higher permit producing markets like Texas and Florida are beginning to see the slow erosion of their affordability market and increasing land prices leading them to wonder how they will be changing in the next few years. Locally, I question how deep the pool of clients that want this type of product is and how much can they afford? I am not yet convinced that condos and infill are the new affordable solution but never say never.”

For information contact:
Rachel Cantor
480.588.1585
rcantor@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.

The Double Edged Sword of Tight Supply

Posted in Salt Lake City Market | Posted on 03-02-2015 | Written by Metrostudy News

  • Despite a slowdown in 2014, the Salt Lake City housing market remains one of the healthiest in the country
  • The supply of resale homes is at the lowest level seen in the market since prior to the recession
  • Tight supply is a double edged sword – even as it pushes buyers into the new home market it increases prices there, and many cannot qualify

 

March 2015: Metrostudy’s 4Q14 survey of the housing market in the Greater Salt Lake region shows that despite a slow 2014, the market remains one of the healthiest in the country.  New home production for both attached and detached new homes in the Greater Salt Lake market has experienced a decrease for the past 3 quarters.  There were a total of 7,576 new home starts in 2014, which is a 9% decrease compared to 2013.  However, with that said, the market averaged a 30% increase from 2012 through the first half of 2014; therefore, it is no surprise that the pace has tapered off.

New home closings for the year totaled 7,502, a 4% decrease from last year.  4Q14 starts totaled 1,953, down 4% from 4Q13, and 3% from 3Q14.  New home closings took a slightly larger hit during the fourth quarter of 2014 for a total of 1,860, which is a 9% decrease from last year, and 8% from last quarter.  Annual starts for Single Family detached homes totaled 5,566 for 2014, down 12% from 2013.  Starts during the fourth quarter are down 3% from last quarter to 1,387.  Annual starts for Attached (for sale)homes totaled 1,999 for 2014, a 1.2% increase over last year.  Starts during the fourth quarter totaled 594, which is up 10% over this time last year, and up 38% from last quarter.

New Home Inventory & Month Supply

SLC 4q14

“According to the Wasatch Front MLS, the supply of used homes in the Greater Salt Lake market is at the lowest level seen in the market since prior to the recession,” said Eric Allen, Director of Metrostudy’s Utah/Idaho region.  “New listings in December totaled 4,680, 13% less than December of 2013.  This tight supply is a doubled edge sword.  While pushing buyers into the new home market, due to the lack of available homes, prices continue to rise, making it difficult for buyers to qualify for those homes.  Annual closings for used homes during 2014 totaled 31,268, a 4.8% increase from 2013.  However, the average days on market has increased to 65 days, up from 56 last December.”

Mortgage qualifications have been a challenge for the past few years; however Fannie Mae and Freddie Mac have indicated that lending requirements may be loosening throughout the year, which could provide a new surge in the housing market.  It appears that new home prices in the Greater Salt Lake market may have finally begun to peak, which will also have a positive impact on housing.

The median price for a new Single Family home is currently $330,720, which has increased 5% from last year at this time.  The median price for a new Attached unit is currently $216,000 which is a 9% increase compared to this time last year, and 3% above last quarter.

New home inventory for Single Family Detached homes has been slowly increasing over the past year, however remains well within equilibrium at 6.8 months.  There are currently 704 finished vacant homes on the ground, a 33% increase over this time last year. There are currently 1,356 townhome units in inventory, a 10.0 month supply, up from 8.6 months in 4Q13.  Of these, 999 are under construction, a 7.4 month supply.  There are also 302 finished vacant units on the ground, which is up 71% from last year. Condo inventory totaled 481 units, which is an 18.2 month supply.

Inventory of vacant developed lots (VDL), or finished lots, for single family detached homes has begun to increase once again.  Compared to last year, VDL inventory increased 5% to a total of 16,248 lots.  Currently the supply is 35 months, up from 29.2 months at this time last year.  There were 6,658 new detached lots delivered to the market in 2014, a 48% increase over 2013, however the market is still in need of good, desirable lots.  Vacant developed lot inventory for townhomes increased 2.4% from last year to 2,773, which is an 18.6 month supply.  There are also 780 condo lots on the ground, which is a 39.7 month supply.

“While new home production waned for 2014, Metrostudy expects demand to remain relatively steady for 2015,” said Allen. “With lending qualifications projected to loosen, a strong job market, along with the possibility of slower rising home prices, many indicators suggest the market will continue to remain healthy.”

For information contact
Eric Allen
801.571.7700 x424
eallen@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.

Signs of Stabilization as Market Finishes 2014 Down

Posted in Boise Market | Posted on 03-02-2015 | Written by Metrostudy News

  • New Home Starts in the Boise market for 2014 are down 15% from 2013
  • Lack of lot inventory in Ada County is holding back production for the region as a whole.
  • We expect loosened lending requirements in 2015 that could provide a new surge of activity in the housing market

March 2015: Metrostudy’s 4Q14 survey of new home production in the Boise/Treasure Valley region shows that the market has experienced a steady decrease for the past 12 months, but appears to be stabilizing. There were 636 new home starts – both attached and detached – in 4Q14, down 10% from 4Q13, and down 21% from 3Q14. Annual new home starts for all of 2014 totaled 2,951, which is a 16% decrease compared to 2013, however is up 21% compared to 2012. New home closings totaled 679 during the fourth quarter, which is 14% below 4Q13, and down 28% from last quarter. Annual closings for 2014 decreased 11% from last year, but are up 37% over 2012.

Ada County started 451 new homes during 4Q14, which is down 12% compared to 4Q13, and another 20% from last quarter. Annual starts for 2014 decreased 17% compared to last year, for a total of 2,146. There were 470 new home closings during 4Q14, down 19% compared to last year, 32% from last quarter. Closings for 2014 were down 15% from last year to 2,176. Canyon County started 183 new homes during the fourth quarter, which is down 3% compared to 4Q13, and down 21% from last quarter [PLEASE REVIEW THAT NUMBER – down 216%??]. Closings during the fourth quarter increased 3% compared to last year, however decreased 10% from last quarter, for a total of 208. Annual new home starts for 2014 decreased 11% from 2013 to 783 and annual closings dropped 1%, for a total of 771.

“The decrease in new home production has primarily occurred in Ada County,” said Eric Allen, Director of Metrostudy’s Utah/Idaho region. “Part of this retraction is due to the lack of lot inventory. Rising home prices have also played a key role in the decrease, and as a result, many new homebuyers are being pushed into Canyon County, where they can find more homes available in the lower price ranges. Mortgage qualifications have been a challenge for the past few years; however Fannie Mae and Freddie Mac have indicated that lending requirements may be loosening throughout the year, which could provide a new surge in the housing market.”

Annual Starts by Price Range

boise 4q14

Home price increases do appear to be slowing, which will also have a positive impact on the housing market. The median price for a new home in Ada County is $292,500, which is up 19% over last year and 3% above last quarter. The median price in Canyon County has increased 8% over last year to $182,300 and is 1% higher than last quarter.

As of December, there is a 5.6 month supply of new single family detached home inventory in the Boise/Treasure Valley market, which is up from 5.0 months recorded at this time last year, and is considered to be below equilibrium (6-9 months). Under construction inventory increased 7% over last year at this time, however decreased 2% from last quarter, which is to be expected. Finished vacant inventory is down 12% from last year and another 8% from last quarter. This represents a 2.0 month supply, which is unchanged from this time last year, and considered to be within equilibrium. There are currently 107 attached homes/units in inventory, which is a 9.7 month supply.

Inventory of vacant developed lots (VDL) in Ada County has increased for the past 3 quarters to 5,352. This is 17% above 4Q13 and up 8% from last quarter. Based on the current pace of absorption this is a 29.9 month supply, up from 21.1 months last year. There were 2,925 lots deliver to the county in 2014, which is 62% more that 2013. Vacant developed lot inventory in Canyon County is down 4% from last year to 3,740. Based on the current pace of absorption, this is a 57.3 month supply, which is up from 53.3 months at this time last year. There have been 611 new lots delivered over the past year, which is 58% more than 2013.

“With new home production scaling back, as we get closer to spring it will be imperative to monitor inventory levels of both finished vacant homes and vacant developed lots,” said Allen. “With a healthy economy, along with the expectations of loosening mortgage qualifications and slower price increases, the Boise/Treasure Valley market should experience a stable market throughout 2015.”

For information contact
Eric Allen
801.571.7700 x424
eallen@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.

Reno Continues Booming

Posted in Reno Market | Posted on 03-02-2015 | Written by Metrostudy News

  • The Reno housing market continues to boom as 4Q14 new home starts are up 54% from 4Q13
  • Annual new home starts for 2014 were 1,458, up nearly 25% over 2013
  • Affordability and supply are concerns as new home starts are concentrated into the higher price ranges; supply of finished homes is at its lowest point since 2006

March 2015: Metrostudy’s 4Q14 survey of the Reno housing market showed that while job growth may have cooled slightly this year, annual new home starts and closings continue to rise. Annual new home starts through 4Q14 were 1,458, up nearly 25% over 4Q13. Annual starts are an indicator of future new home closings, and annual closings are 1,331, which is 24% more than one year ago. Increased demand continues to drive builders to start new homes. Quarterly new home starts in the fourth quarter were 54% higher than in 4Q13.

Our average “offer to build” base price for new homes in active projects decreased slightly to $331K. This is an increase of about 1% from one year ago. The average price has increased steadily since 2012 and now, base prices have remained fairly steady over the past year. Builders are pricing their product to the competing resales and trying to remain in line with market affordability.

reno 4q14

“Start activity has shifted over last year into the price ranges above $300K as builders adjust pricing to offset increased land and construction costs,” said Greg Gross, Director of Metrostudy’s Nevada region. “Again, this quarter we are seeing starts fall in the range below $300K. Lot costs are also increasing as lot supply dwindles. Affordability remains a concern as home prices are rapidly increasing. Last year, 54% of all new home starts were under $300k; this year only 39% were priced below $300k.”

With 126 Finished Vacant Single Family homes, the market has only 1 month of supply at current absorption pace. The number of Finished Vacant Homes is at the lowest level since Metrostudy began tracking the Reno market in 2006. Finished Vacant Homes make up only 15% of total housing inventory which is below what we consider equilibrium. However, the number of Under Construction homes has increased 30% since last year. We will continue to closely monitor inventory levels over the next two quarters, but it appears the market is not at immediate risk for over-supply.

The Reno market has virtually ceased single family lot delivery, but with lot absorption outpacing lot deliveries for more than four years, lot Inventory continues to shrink. The greater Reno market has less than 5,000 Finished and Vacant single family lots which equates to 41 months of supply or roughly 3.5 years, based on current start pace. Only 3 years ago we had 14 YEARS of lot supply!

Over-supply of lots along with diminished demand has driven down lot prices and land values in the past, but shrinking supply will force builders to pay more for future lots, which may pressure affordability which is already worrisome. As long as the job recovery continues, most indicators suggest 2015 will outpace 2014.

“Builder confidence in the market continues to strengthen as the market is at 2008 levels,” said Gross. “The new normal will be steady absorptions, increased construction costs and a tightened labor supply.  Metrostudy expects demand to remain steady as 2015 begins. Nevada is once again to top relocation destination, and more companies are beginning to consider Nevada. The Tesla announcement earlier this year has re-energized economic development for the state.”

For information contact:
greg gross @ 916-231-9370
email ggross@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.