The New Normal: As the Market Stabilizes, Expectations for Growth are Modest

Posted in Maryland Market | Posted on 12-10-2014 | Written by Metrostudy News

  • 3Q14 Home Starts are down 4% YoY, a surprise given the positive market indicators;
  • Market Strength varies by County – the largest increase in starts was in Anne Arundel County
  • Despite slight decline in new-home demand, builders have maintained a tight control on their inventory levels

December 2014: According to the Metrostudy’s 3Q14 survey of the Maryland housing market – which includes nearly the entire state save the Eastern Shore south of Queen Anne’s County – home starts, attached and detached, numbered 8,983 during the year ending 3Q14. This is down 4 percent from 3Q13, a surprising decline given the decent job growth and healthy resale housing market indicators. Annual new home closings, or “move-ins” by Metrostudy methodology, were up slightly as builders closed 8,913 units during the year ending 3Q14, an increase of only 1.9 percent from a year ago.

In the resale home market, supply is growing and Maryland is now a more balanced market as opposed to a sellers’ market. September single family resale listings in Maryland numbered 24,633 units, up 24 percent from a year ago. Resale inventory now measures 5.4 months of supply, which is normal by historical standards. It is a little higher in Baltimore at 6.2 months and lower in Suburban Maryland at 4.6 months. Overall, resale prices should continue to climb at a normal rate.

During the 12 months ending June, Maryland MLS sales numbered 54,613 units, up only 1 percent from one year ago, as the annual rate of sales has leveled off since the beginning of the year. The median price of a home sold in this area through the MLS reached $265,000 in September, a 3 percent increase from $257,000 12 months ago. The median price in Suburban Maryland is $280,000, which is up 5 percent from one year ago, while Baltimore – at $245,000 – is even with last year. Median price is not the best indicator of home price appreciation. According to Clear Capital’s repeat-sales index, home values are up 5.9 percent year over year in the DC Metro area and up 2.1 percent in Baltimore.

“In terms of starts activity, Maryland is led by Prince George’s and Montgomery Counties in DC Metro and Howard and Anne Arundel in Baltimore Metro, combining for 54 percent of Maryland’s annual starts,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic Region. “Anne Arundel County experienced the largest increase in annual starts, growing by 174 units compared to one year ago. Washington DC, which Metrostudy includes in Maryland, also experienced notable growth, growing by 114 units over last year. Unfortunately, most areas of            Maryland experienced a decline as 11 of 16 market areas lost ground compared to a year ago. The weakest are Baltimore City (-170 units), St. Mary’s County, (-114 units), and Howard county (-102 units).”

The overall inventory of vacant developed lots (VDL), or finished lots, numbers 12,489, which is down 4 percent from last year. This is for all product types, including attached product as well as custom lots. The corresponding months of supply are essentially even with one year ago. Current supply of 17 months is quite low, as this is one of the most land constrained markets in the country. The supply of VDL varies by county, but it is generally lowest in the most active submarkets and in infill areas: Washington DC (4 months), Howard (5 months), Montgomery (8.5 months), and Baltimore (10 months). Higher lot supplies persist in Cecil County (53 months), and in Calvert County and Baltimore City (each at 47 months).

With Maryland being such a land-constrained market, much attention is focused on future lot supply. Metrostudy follows and reports on the entitlement of over 200,000 future lots in the state, but only 24,436 of these are recorded at the counties. Currently, Prince George’s County has the most capacity to meet current and near-future demand needs.

As new-home demand has declined slightly, it appears that builders remain disciplined with spec inventory. Finished vacant new homes number 1,806 units in Maryland, which would last 2.4 months at the current closings pace. Both measures are mostly unchanged from one year ago, and relative supply is normal by historical standards. Furthermore, finished vacant inventory is quite low for townhomes and single family, which measure 1.3 and 1.2 months, respectively. These two product types account for 90 percent of Maryland starts.

“Feedback from Maryland builders is somewhat more positive compared to Northern Virginia,” said Sage.  “One reason for this is that Maryland builders have a similar number of open communities now compared to last year, whereas competition in Northern Virginia has increased. Maryland is also experiencing stronger job growth; however, neither market is performing up to expectations. Until we get more economic traction on a regional basis, housing growth expectations should remain modest.”

For information contact:
Ben Sage -703.574.8429
bsage@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.

San Antonio New Home Market Best Numbers in Seven Years

Posted in San Antonio Market | Posted on 12-01-2014 | Written by Metrostudy News

December 2014: “The San Antonio housing market in the Third Quarter of 2014 saw new home builders generate the highest level of single-family starts since 2007.  In addition, new home closings were the best since 2008.” says Jack Inselmann of longtime Director of Metrostudy-San Antonio.  “New home inventory overall is still relatively healthy, home prices are increasing and housing values are improving.”  “In addition, new lot delivery has finally caught up with demand thereby beginning to fill a void that has impacted production over the last couple of years.”  “The annual starts increase over a year ago would be higher if the market was able to produce new lots for housing priced below $200,000”, says Inselmann.

In 3Q14 there were 2,693 single family starts which is a 17.1% increase when compared to the 3Q13 rate of 2,299.  The current Annual Starts rate is 8,927 which is 4.5% higher than the 3Q13 annual rate of 8,543.  3Q14 closings totaled 2,362 which is an 8.2% increase over the 3Q13 rate of 2,183.  The current Annual Closings rate is 8,406 units, a 3.9% increase over the 3Q13 annual rate of 8,088.  All of the increases have occurred in housing priced about $200,000 thereby overcoming a decline in starts under $200,000.

Developed lot inventory has decreased for the first time in 18 months in the third quarter as we had more lot absorption than lot delivery.  However, when compared to a year ago developed lot inventory is up 400 lots, from 17,027 to 17,433.  This has helped to stabilize the lot inventory and provide some relief to high demand areas that saw their lot supplies diminish over the last three years.  “Of course the key difficulty remains in keeping lot costs in line with the San Antonio affordability ratio where it is now virtually impossible to reproduce lots for new housing priced under $175,000.”

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.

The RGV continues to lag in the Texas Market; still we see pockets of possibility

Posted in Rio Grande Valley Market | Posted on 12-01-2014 | Written by Metrostudy News

  • The market is showing signs of much needed improvement as the annual starts rate through 3Q14 is up 8.3% over last year; this is despite a 11.4% decline in 3Q14 over 3Q13
  • We continue to see high inventory levels in this market, although the levels of inventory vary dramatically by subdivision.

December 2014: The annual rate of new home construction in the Rio Grande Valley as determined by Metrostudy’s 3rd quarter survey is 1,790 starts, up 137 units, or 8.3%, over the 3Q13 rate of 1,653. The Rio Grande Valley had 373 starts in the 3rd quarter, an 11.4% decline from 3Q13. The number of new home closings in the year ending 3Q14 was 1,840, up 104 units, or 6.0%, over the 3Q13 rate of 1,736. There were 426 closings in the 3rd quarter, down 5.1% from 3Q13.

Metrostudy’s 3Q14 survey found the level of new home inventory continued to be high relative to the number of closings in the same period. There were a total of 1,262 homes in inventory at the end of 3Q14, which represents an 8.2 months of supply based on the annual closings rate of 1,840. Metrostudy documented 624 homes under construction at the end of the 3rd quarter, a decrease of 54 units compared to 3Q13. The inventory of finished vacant units totaled 618 homes at the end of 3Q14, up slightly compared to the 3Q13 level of 587, but down from last quarter. Based on the closings rate for the 3rd quarter, the current level of finished vacant inventory represents 4.0 months of supply; a significant oversupply compared to current demand.

It is important to note that the top 55 most active subdivisions ranked by annual starts [9+ annual starts] have a 42.9 months of supply. This is a much healthier level by far when compared to the overall 101.1 months supply. This is important as it leads to a discussion of a small core group of active subdivisions and large group of fairly inactive subdivisions. The top subs group have a starts rate of 927 and a current developed lot supply of 3,314.

“The Rio Grande Valley area continues to lag behind the rest of the state in terms of economic and housing activity and total recovery from the bottom of the recession,” said Inselmann. “However, the analysis shows consistent though small growth – a much needed improvement over the last few years. Inventories are improving, prices are rising, and there is a good pocket of construction in a small group of subdivisions. In the near term the RGV housing market overall analysis will look somewhat mediocre except for the core group of subdivisions that generates approximately 50% of all new home construction and holds tighter inventories and exhibits better trends. There are still issues with excess housing inventories in both the new home and resale markets, as well as foreclosure inventory. Complete recovery doesn’t occur until inventories are brought back in line with demand, and that still remains somewhere down the line. It is expected that The Rio Grande Valley will remain a smaller market that hopes for steady growth and improvement in all facets of production and inventories. Current trends shows that is happening and that is the best positive statement of all for this region.”

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.

Growth continues to moderate in 2014: Higher Price Points are seeing strength

Posted in Sarasota - Bradenton Market | Posted on 11-21-2014 | Written by Metrostudy News

  • Sarasota’s new home starts for 3Q14 are up 20.4% over 3Q13; annualized rate is up 15.1% YoY
  • We continue to see a squeeze on first time and lower income homebuyers as the annualized rate of new home starts under $250k is down 26.5% YoY
  • Growth in starts is heading to the higher end: 193% of the growth came in price points above $250k

Metrostudy’s survey of the Sarasota-Bradenton housing market showed 1,032 single-family units were started in the third quarter of 2014, an increase of 20.4% over 3Q13. It marked the third time in the last four quarters that quarterly starts were over 1,000 units. The annual start rate compared to last year increased by 15.1%, to 3,975 annual starts. Single-family quarterly closings totaled 821 units, which was 5.8% higher than 3Q13. The annual closings rate was 3,585 units per year, which was 18.1% above the annual closings rate the same quarter last year.

tp3q

“For the twelve months ending September 30, 2014, new homes starts in price ranges under $250k totaled 1,349 units down 26.5% from the 3Q2013 annual activity,” said Tony Polito, Regional Director of Metrostudy’s Sarasota market. “Annual new homes starts in prices over $250k were up 62.2% for the twelve months ending September 30, 2014 versus 3Q2013. The marginal 521 unit increase in the annual start pace was split: 486 less units under $250k and 1,007 additional units above $250k.  193% of the growth came in price points above $250k.”

Inventories increased by 21.7% compared to the same quarter last year.  Compared to last year, under construction inventory rose by 316 units to 1,638. Finished vacant inventory increased by 11.3% from 302 units last year to 336 this year.  However, the number of move-ins exceeded completions during the quarter and FV inventory decreased by 45 units.  Model home inventory was up 40 units from last year at 212 total models. The increased model count is a clear sign of builder confidence.

This quarter 347 lots were delivered to the Sarasota- Bradenton market. Vacant developed lot inventory stands at 37,380 lots, a decrease of 1.9% compared to 38,098 lots last year. Based upon the annual start rate, this level of lot inventory represents a 112.8 month supply, a decrease of 20 months compared to last year. At the end of 3Q2014, Manatee County had a 26.3-month supply, down from a 27.5-month supply of VDL in 3Q2013. Sarasota County had a 30.0-month supply at 3Q2014, down from 41.4- month supply at 3Q2013. Housing activity increased in all three Counties, thereby reducing VDL months of supply.

“The double digit growth of 2012 and 2013 has moderated in 2014 and we suspect that housing starts growth will come in under 10% by year end,” said Polito.  “National economic worries have keep interest rates low during the quarter which is a positive for demand. However, a large percent of housing demand comes from retirees and empty nesters, which are less interest rate sensitive. A review of deed records indicates that pricing remains up. The overall market saw a 19.5% increase in prices versus mid-2013. However, over the last 90 days prices are up just 2.5%. Compared to last year, the average home is 13% larger at 2,267 SF and the price per square foot is up 5.6% to $130/SF. The winter forecast for much of the country is for temperatures colder than average, which is good for Florida builders.”

The final significant trend worth noting is new housing inventory. We consider FV equilibrium as between 1.5 and 2.0 months. The supply of finished vacant housing units has been dropping since 4Q2006. As of September 30, 2014, the months of supply of FV units for all of Sarasota/Bradenton stood at 1.1 months. We did see a 2Q increase in the number of units (up from 318 to 381) and the MOS (up to 1.3 months). That increase was erased in 3Q leaving a low supply going into “season”. The County by County finished vacant supply indicates that Manatee County is below equilibrium level of FV supply at 1.3 months. Sarasota County is even further below equilibrium level at 0.8 months. Charlotte County is now below equilibrium with a 1.2 month supply. The UC months of supply are up to 5.5 months from 4.5 months in 1Q2013. This should bring us some needed FV units by December, just in time for “snowbird season”.

The top three market areas based on annual starts are shown below.

Market Area                   Ann Starts (% Chg)

Manatee …………………………….. 2,119 (+2.8%)

Sarasota …………………………… 1,450 (+29.7%)

Charlotte …………………………….. 389 (+41.5%)

The table below ranks the top ten communities in the market by annual starts.

Community (Area)                              Ann Starts

Lakewood Ranch………………………………….514

The West Villages………………………………. 266

South Gulf Cove…………………………………..173

Palmer Ranch……………………………………..167

Grand Palm………………………………………..155

Esplanade By Siesta Key ………………………..130

Heritage Harbour …………………………………126

Harrison Ranch……………………………………. 94

Greyhawk Landing ……………………………….. 87

Copperstone……………………………………….. 66

During 3Q2014, Manatee County recorded 570 housing starts, down 2.2% versus 583 starts in 3Q2013. Sarasota County recorded 347 housing starts in 3Q2014 compared to 252 starts in 3Q2013, a 37.7% increase, as the West Villages, Palmer Ranch and Esplande by Siesta Key all saw new starts activity double from late 2013.

For information contact:
Tony Polito
813.888.5151
tpolito@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.

Prices Hold, Results Mixed

Posted in Tampa Market | Posted on 11-21-2014 | Written by Metrostudy News

  • While 3Q14 New Home Starts are up 10.8% over 3Q14, the annual starts rate is down 7%
  • Product below $200k is squeezed, as starts in that price range are down over 18% YoY
  • We are not seeing enough employment growth in the Tampa region to drive housing demand

Metrostudy’s 3Q14 survey of the Tampa housing market showed that 1,932 single-family units were started in the quarter, up 10.8% from 3Q13. Still, the annual starts rate, compared to last year, decreased by 7.0%, to 5,995 annual starts. Single-family quarterly closings totaled 1,499 units, which is 11.4% lower than the 1,692 closings during the 3rd Quarter of last year. The annual closings rate was 6,269 units which was 11.3% above the annual closings rate of 5,630 units for the twelve months ending 3Q13.

Total single-family inventory, which is composed of units under construction, finished vacant and models equaled 3,889 units on the ground at the end of the 3rd Quarter of 2014; an 7.4-month supply.  Compared to last year, the number of units under construction fell by 226 homes to 2,087 homes. Finished vacant inventory decreased by 8.1% from 1,590 units last year to 1,461 this year.  However, the number of completions exceeded move-ins during the quarter and FV inventory increased by 137 units versus 2Q14. The FV months of supply grew from 1.8 to 2.1 months.

This quarter, 2,462 lots were delivered to the Tampa market. This same quarter a year ago, we delivered 1,142 lots. Vacant developed lot inventory stands at 29,489 lots, an increase of 4.6% compared to 28,183 lots last year. Based upon the annual start rate, this level of lot inventory represents a 59.0 month supply, an increase of 6.5 months compared to last year.

Annual Starts by Price Range

3qrc

“For the twelve months ending September 2014, annual new home starts in price ranges under $200k totaled 1,639 units,” said Tony Polito, Director of Metrostudy’s Tampa region. “This was down 18.4% from the 3Q 2013 annual activity in prices less than $200k. New home starts in prices over $200k were down 1.8% for 2014 versus 2013. The marginal 448 unit decrease in the annual start pace was split: 369 fewer units under $200k and 79 fewer units above $200k.”

Ideally the Tampa Bay area would be adding 2,000 to 3,000 jobs monthly. In reality, Tampa Bay’s employment level grew by just 2,700 jobs from June 2014 to September 2014. This was not enough of a pace to create significant demand for new housing.  This lack of job creation was reflected in the local unemployment rate growing from 6.3% in June to 6.8% in August. The lingering concerns in the employment markets on a national scale have helped to keep interest rates low during the quarter.

“The year over year starts pace is being compared to the strong spring of 2013 and is down 7%,” said Polito. “However, the 3Q increase in starts exceeded the 2Q13 peak of this recovery cycle and may be a sign of builders starting extra spec units in search of year end closings. A review of deed records thru September indicates price increases from 2013 had held, but the rate of pricing growth has slowed substantially. Additionally, we are seeing more incentives being offered. Tampa’s new housing sector remains heavily reliant upon job creation and interest rates to drive demand.

The other significant trends involve new housing inventory. Finished Vacant units grew by 137 units during 3Q 2014 and at 2.1 months, the supply of FV units still needs to come down nearer to 1.5 months. The backlog of under construction units grew from 1,837 units as of June 2014 to 2,087 units as of September 2014. The UC months of supply has grown from 3.4 months for 2Q 2014 to 4.0 months as of 3Q 2014. The Under Construction MOS have been trending up the last two quarters. This was despite an increase in the number of units being completed; 1,682 units completed in 3Q versus 1,216 completions in 2Q.

Market areas based on annual starts are shown below.

Market Area                                Ann Starts (% Chg)

Hillsborough…………………………………….3,583 (-18.7%)

Pasco……………………………………………….1,584 (+3.6%)

Pinellas…………………………………………….513 (+66.0%)

Hernando……………………………………….180 (+48.8%)

The table below ranks the top ten communities in the market by annual starts.

Community (Area)                      Ann Starts

Magnolia Park………………………………………..185

FishHawk Ranch …………………………………….175

Sun City Center ……………………………………..155

Valencia Lakes……………………………………….151

Waterset ………………………………………………149

K-Bar Ranch ………………………………………….129

Lake Brandon ………………………………………..125

Seven Oaks …………………………………………..121

Concord Station……………………………………..119

Citrus Hills…………………………………………….118

Hillsborough County remained the most active county within the Tampa market. However, Hillsborough County lost market share, down from 68.4% for 3Q13 to 59.8% for 3Q14. Market share in Pasco grew from 23.7% for 3Q13 to 26.4% for 3Q14 as quarterly starts increased from 376 in 2Q14 to 523 for 3Q14. The VDL supply throughout all of Hillsborough County stood at 28.2 months. The VDL supply in Pasco stood at 48.7 months as of September 30, 2014. These two major counties accounted for 86.2% of all annual start activity in Tampa Bay as of 3Q 2014.

For information contact:
Tony Polito
813.888.5151
tpolito@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.

With Fading Affordability & Fence sitting Millennials, 2014 may be a year builders will be ready to forget

Posted in Phoenix - Tucson Market | Posted on 11-19-2014 | Written by Metrostudy News

  • Metrostudy’s 3Q14 survey of the Phoenix market shows starts down 10% for the year; closings are also trending down
  • We continue to see the strongest growth in the Northeast Valley
  • As affordability begins to fade and millennials content to wait it out it is expected that 2014 will be a lackluster year and one that some builders will be ready to forget.

November 2014:  According to the Metrostudy 3Q14 survey, home starts, attached and detached, in the Phoenix area numbered 10,755 over the last four quarters. Starts saw a larger decrease for the quarter down 10% for the year with the largest decline (23%) expected in Pinal County. The Northeast Valley continues to see the strongest starts growth year over year with an increase of 37.4% (860 starts). Closings over the last four quarters are also trending down to 10,891; though we had hoped that closings would remain flat for the quarter we are now trending down 5.9% for the year.

MLS listings continue to remain flat for the year with 23,195 listings in September. We are seeing higher listings than 2013, up 13%. Though sales have been down 13.86% from June 2014, we are still way below a normal resale market of 5-6 months of supply. The market is currently holding 3.9 months of supply. Days on market have been holding steady at 84 days since the beginning of 2014. In September of 2013, the days on market were 61 days.

For the four quarters ending in 3Q14, single family annual MLS sales numbered 71,972 units, down 14.8% from one year ago. The median price of a single-family home sold through the MLS dropped slightly in September reaching $199,000, a 4.7 percent increase from twelve months ago. The average price per square foot is trending down as well at $125.83 as reported by the Cromford report. Just as we are seeing in the new home market, it is no longer a seller’s market.

“The story remains much the same in the SE Valley, which is outpacing other submarkets by leaps and bounds,” said Rachel Cantor, Director of Metrostudy’s Phoenix Region. “Nine of the top 25 master planned communities in the Phoenix market are located in the SE Valley which includes The Bridges, Morrison Ranch, Eastmark, and Adora Trails. Though the starts look good, most builders that are sitting in subdivisions such as Eastmark or The Bridges are not currently feeling the wonders of being in the top 25 communities. The competition is constantly changing as builders fight to meet their end of year numbers and move specs in these communities. Buyers are attracted to this market for a number of reasons and though builders may not be happy in these subdivisions now is the time to start thinking about replacement projects. Price pressure is expected through the end of the year and builders should start looking at 2015 and 2016 projects to ensure proper product placement and pricing.”

The overall inventory of vacant developed lots (VDL) continues to rise in Q314. The total of 54,309 vacant lots includes all product types, including attached product as well as custom lots. Though VDL inventory has seen minor growth year over year currently 5% from Q3 2013 it has been on an upward trend. 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.  As builders continue to struggle with sales across the valley we have expected to see more finished vacant inventory on the ground this quarter. We actually tracked only 1 percent growth Q3 over Q2. The number of newly built finished vacant units totals 2,550, which is up 20 percent from one year ago.

“As advised previously during the year, we advise builders to approach 2015 with caution,” said Cantor. “With mixed signals comings from buyers within the Phoenix market and no strong indicators for job growth or major mortgage changes it is time to prepare for only moderate growth of 10-15 percent until 2017. Though the lower down payment requirements will probably help some buyers with their purchase, I do not expect this to bring buyers out of the woodwork. With the increase in interest rates now being pushed until end of 2015 to early 2016 and millennials not expected to begin purchasing until 2017 micro awareness of your target buyer and segment is extremely important for builders over coming year. For now, as we wait for the year to close out, expect to see more incentives but very little changes in base pricing.”

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, 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.

Recent Growth Not Sustainable: Limited Lot Supply and Consumer Caution Causing a Slowdown

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

  • Annual New Home Starts through 3Q14 down 6% YoY
  • Builders and developers are feeling a squeeze from a lack of quality lots in desirable locations
  • Metrostudy is revising its 2014 forecast downward as the consumer is sitting on the sidelines

November 2014: Through the first nine months of 2014, there have been a total of 3,272 new housing units started (including single-family detached, townhome, and duplex units), a decline of 6.0% compared to the first nine months of 2013. The 1,233 units started in the third quarter of this year represents a decline of 3.1% over the 3q13 starts total.         The annual rate of starts currently stands at 4,232 units, while the annual rate of closings is at 4,144 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 middle quarters of 2014 were down 3.4% when compared to the same six-month stretch in 2013,” said Chris Huecksteadt, Regional Director of Metrostudy’s Indianapolis market.          “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.  Limited supply in quality locations, a cautious consumer, and modest economic growth are the primary reasons for the recent slowdown in new home activity.”

Through the first nine months of 2014, the majority of counties surveyed by Metrostudy saw a decline compared to construction activity in the first half of last year.  Hamilton County still leads the way with approximately 41.1% of all new home construction in the Indianapolis market occurring there. Hendricks County is the new number two (formerly Marion County) representing 14.1% of Indianapolis new home construction over the past year.  One county actually saw a significant increase in starts activity this year: Hancock County, increasing from 201 starts through the first nine months of 2013 to 293 starts in the first nine months of this year.      Nearly all of this increase came from Springs at Deer Crossing in McCordsville, with 75 new home starts in 2014.

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At the bottom of the market, standing new home inventory was a major concern, with a 3.5 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 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 in both the second and third quarters of this year.  With the slowdown in the new home market, caution would be prudent regarding any increase in spec inventory.

“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 Indianapolis has fallen from a high of nearly 80 months in the second quarter of 2009, to a current level of just 27.5 months,” said Huecksteadt. “ For two straight quarters now the months of supply indicator has been below 30 months.  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.”

Only Hendricks and Marion Counties exhibited a months of lot supply above the 30-month threshold.  All of the other markets in the Indianapolis survey are below 30 months, with Boone and Hamilton Counties currently at less than 24 months. Hamilton County accounts for more than 40% of all construction activity in the Indianapolis market and currently has a 20.5 month supply of lot inventory available. With the majority of lots in Hamilton County already spoken for, builders are aggressively seeking out opportunities and developers are looking to get lots to the market in order to meet the demand that is likely to occur.  It may be the case that the lack of available supply is contributing somewhat to the slowdown in activity.

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 tepid at best.  Given these factors, Metrostudy has revised it’s forecast downward to a range of 4,000 to 4,500 new home starts in 2014.  Next years 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.

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 and websites; marquee trade shows and 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 Data Confirm the Need to “Drill Down” for the “Real Story”

Posted in National Housing Market | Posted on 11-19-2014 | Written by Brad Hunter

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Taken in total, the housing starts data paint a picture of boring, flat, lackluster performance in 2014.  Dig deeper into the data, however, and you see a much more dynamic picture.  The year is not over yet, but from the data we have collected first-hand, on nearly 100 metropolitan statistical areas in the country, we see markets ranging from a 21% decline in the past four quarters to a 45.8% increase!

Let’s look at a few of the stand-outs.  The data below indicate the percentage change in single-family detached starts from 3Q13 through 3Q14.

In Southwest Florida, the Naples/Ft. Myers market’s single-family starts rose 45.8% in the past year.   Demand is expanding rapidly in both counties in this region (Lee and Collier), predominantly family move-up, but with a rapidly-growing active-adult population.  Not only are single-family homes in demand, but low-rise condos and townhomes are booming as well.  This was a market that got massively overbuilt during the boom and fell extremely hard during the downturn.  Now it is coming up rapidly from a recently-low level.   Existing home prices in Lee County are already back up to early 2004 price levels.  New homes are concentrated in the $300,000-$400,000 range.

Southern California home construction is up 28.4% year-on-year, with the greatest increases occurring in the Inland Empire and in Los Angeles County.  This market had a massive foreclosure problem during the recession, but the quick (non-judicial) system in California allowed for a relatively quick clean-up.  Foreclosures and bank-owned homes are still numerous, but they no longer pose a competitive threat to the builders.

Lot development has picked up sharply in the past two years, with new lot “deliveries” running ahead of the current pace of housing starts.   (A lot “delivery” occurs when a homesite reaches the stage of infrastructure development at which a builder can start construction).

In the next five years, based upon demand, and based upon the data on lot deliveries, the Inland Empire (Riverside and San Bernardino) will see a massive surge of home building activity.

Benefitting from the same non-judicial foreclosure system as Southern California, Northern California is seeing very strong growth.  Single-family housing starts rose 23.4% over the past year, with the Bay Area and Sacramento both seeing increased activity.  The pace of lot deliveries is outrunning starts, which indicates the opening of new communities that will be starting more new homes in 2015.

Other winners over this time period were:

  • Sarasota/Bradenton, up 18.8%
  • San Antonio, up 17.1%
  • Austin, up 16.8%

A few noteworthy “decliners” were:

  • Boise, down 20.7%
  • Suburban Maryland, down 20.6%
  • Phoenix/Tucson, down 19.1%

Metrostudy Names Dennis Handler Regional Director for Southern California

Posted in National Housing Market | Posted on 11-19-2014 | Written by Metrostudy News

Irvine, CA – November 18, 2014   Metrostudy, a Hanley Wood company, announced today the appointment of Dennis Handler as Regional Director for Metrostudy’s Southern California markets.

Handler joins Metrostudy with over 15 years of residential real estate marketing and development and corporate finance for Fortune 500 and international companies.  This extensive experience has provided Dennis with a diversified understanding and knowledge base that has proven to be an invaluable resource for his clients. He most recently was an independent consultant for public and private builders, including D.R. Horton, Williams Homes and K. Hovnanian.  Additionally, he has provided extensive due diligence and market analysis for public and private residential developers, focusing on land and fee development budgets, entitlements and permits, strategic marketing, competitive analysis, and project management for projects located throughout California and Saudi Arabia.

“Dennis is a highly experienced professional and he makes a strong addition to the Metrostudy team,” said Mike Castleman, Metrostudy’s Western U.S. Senior Vice President. Handler will oversee all operations for Metrostudy’s Southern California market, including consulting with builders, developers and financial institutions regarding housing and economic market conditions.

For information contact
Danielle Fiore
(813) 361-5592
dfiore@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; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.