Feb. 25: Certain markets doing well, others not; % of SF Housing Starts above $1 million

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. See more

How about an overview of Metrostudy’s 4th Quarter housing trends per market as provided by Brad Hunter?

 

It’s remarkable how a housing market that was the epitome of distress can come back to life with a vengeance, and also how a market that is runnin’ and gunnin’ one year can run out of gas the next.  The latest study of housing markets nationwide by Metrostudy shows that markets can be divided with descriptors such as “winners” and “losers,” and some of these have switched descriptors in the last twelve months.

 

In the four-quarter period ending with 4Q15, single-family housing construction (“detached housing starts”) within Metrostudy’s coverage area rose 14.1% (while move-ins rose 7.8%). Strong gainers included markets such as Southern California, where starts rose 83.5%. It seems that the slowdown of China’s economy has yet to negatively impact Southern California housing.

 

In this article, some of the more dramatic local market stories, and some of its brand-new data from markets all around the country are highlighted.

 

Texas, which had been the envy of the rest of the country, is much slower, particularly Houston (detached housing starts fell there by 13.4% over the past four quarters).  Sales paces have slowed, impacting the pace of housing starts, and depressing prices.  The $400,000+ price point in Houston has seen much slower sales as well as increased cancellations. DR Horton’s entry-level communities are still doing well, but Horton’s executives anticipate a flattening even in that niche before much longer.  Many builders have put land acquisitions in Houston on hold.  The more economically diverse Dallas market saw a large increase in starts in the fourth quarter (up 13.9%), but orders have recently started to slow there as well.

 

Meanwhile, San Diego detached housing starts (including Imperial Valley) are more than double what they were four quarters ago, but that is partly because it is off of a particularly low level of activity in the fourth quarter of 2014. That said, the pace of new home construction has legitimately soared, as builders have begun to shift the mix of their products to appeal to a lower price point. There has been a gradual increase of housing starts for homes under $600,000, with 34% of starts activity in San Diego being below $500,000 as builders continue to focus on that higher-volume audience.

 

Northern California starts are up dramatically (+80.6%), but that may be somewhat of an anomaly, rather than something that can be sustained.  Builders were anticipating a stronger rainy season due to El Niño, so they needed to get slabs poured, and that created a pull-forward effect that is visible in the data.  We are watchful regarding 2016, since job growth in Northern California has been slowing; more concerning is the fact that 68% of all new jobs created in Sacramento are in leisure and retail sectors. The Bay Area is becoming unaffordable, which is especially concerning given the slowdown of Asian investors coming in.

 

In the fourth quarter, 22% of all new home starts in the Bay Area were above $1 million. This begins to push buyers into outlying markets like Solano County, where starts are up 127% over 2014.  This pushing-out of buyers (“drive ‘til you qualify”) is going to be a continuing theme this year and next, not only here, but in markets all around the country.

 

Most of the Florida markets are doing well, finally having shaken off the judicial-state foreclosure blues.  Tampa enjoyed a particularly strong rebound over the past twelve months (up 48.8%).  The Tampa surge was distributed across all price points, too.  All of the jobs during the downturn have come back, and this is a job-driven market (as Florida markets go).  Naples and Ft. Myers are on a roll as well (single-family starts are up 35.3% there in the past four quarters).  Southeast Florida is seeing very strong demand, but limited land supplies are preventing a larger increase in starts activity; even with that challenge, it was up 24.7% over the past 4 quarters!

 

Atlanta is coming back.  Detached housing starts rose another 16.7% during the past four quarters, and builders are hungry for more lots within the Golden Triangle.  Watch for the revival of zombie lots in Gwinnett County and north Fulton County, and for some a lot of new greenfield development in Cherokee.  South Forsyth will remain the “A” area for the time being.

 

Las Vegas is another market that was badly beaten down during the crash, but detached housing starts there are up 12.1% in the past four quarters (and lot development is also up 12.7%).  Inspirada is back online and is now back on our Top 25 Communities list for the country.

 

Phoenix is yet another market that burned down circa 2008, and then rose from its own ashes a few years later.  It stumbled badly once again in 2014, but then came back up nicely in 2015 (detached home starts shot up 70.5% over the past four quarters!).

 

In terms of starts, Austin slowed down its pace in 2015 (-1.5%), but this town is gearing up for strong growth, with a 26% increase in developed lots over the past four quarters.  Our viewpoint is that Austin was seriously under-lotted, and is just now catching up with demand.  Watch for an increase in construction activity in the next few quarters, particularly in the Kyle/Buda, and Pflugerville submarkets.

 

Indianapolis was flat in terms of starts during 2015, but it has added 15.6% to its supply of vacant, developed lots in the past four quarters, pointing to increased starts in the near future.

 

 

An old, blind cowboy wanders into an all-girl biker bar by mistake.

He finds his way to a barstool and orders a shot of Jack Daniels.

After sitting there for a while, he yells to the bartender, “Hey, you wanna hear a blonde joke?”

The bar immediately falls absolutely silent.

In a very deep, husky voice, the woman next to him says, “Before you tell that joke, Cowboy, I think it is only fair, given that you are blind, that you should know five things…

  1. The bartender is a blonde girl with a baseball bat.
  2. The bouncer is a blonde girl.
  3. I’m a six-foot tall, 175-pound blonde woman with a black belt in karate.
  4. The woman sitting next to me is blonde and a professional weightlifter.
  5. The lady to your right is blonde and a professional wrestler.

Now, think about it seriously, Cowboy. Do you still wanna tell that blonde joke?”

The blind cowboy thinks for a second, shakes his head and mutters, “Well no! Not if I’m gonna have to explain it five darned times.”

 

 

Rob

 

(Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman. To subscribe please visit www.knowledgeforrealestateagents.com.)