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Triangle Real Estate Trend Report
For 3Q17, Quarterly New Home Starts are at the Highest Levels since 2008 – Annual Starts are up 15% YoY
Quarterly New home closings totaled 862 units for 3Q17, up 10% YoY while Annual Closings are up 14.2% over the year prior.
The market is stimulated by the under $250k priced house,targetingfirst time buyers and those who are may be priced out of the areas in the Triangle housing market and are willing to commute for their jobs. Conversely back on 1Q17, production had growth in all price points above $250K while production continued to decline in the sub-$250K market. Homes priced between $300K and $399K continue to lead the market in terms of production growth rate with 34% more starts than a year ago.
Amanda Hoyle Director at Metrostudy 3Q17 report on new housing surveying of the housing market in North Carolina’s and surrounding areas show’s that new home starts in increased 13.1% over the year in the Triad. Builders though out the state were able leverage a mild summer weather pattern and ramped up construction of new home communities in the Triad. The market finished with 989 new starts for the quarter, the highest total of new home starts since 2008, which was also 5.8 % more housing starts in 2Q17.
Triangle new homes was no slouch jumping 15.4% over the year of the third quarter as Triangle homebuilders took advantage of the fair weather. The Triangle market finished with 3,503 new starts for the quarter, scoring a new start record not seen since 2007.
The number of annual starts, or the sum of the past four quarters, totaled 11,903 detached and attached units, bringing the Triangle’s new home construction market closer to its equilibrium level of about 12,000 new starts for the year. New home closings – previously unoccupied new homes that now are occupied - totaled 2,938 units for the third quarter, a 6.6 percent increase over the year prior. The number of annual closings from the past four quarters totaled 10,928 units, a 6.5 percent increase over the year prior.
Mrs. Hoyle also stated that Triangle builders are pushing to grow the market’s total inventory of new homes – models, finished vacant unoccupied new homes, and new homes under construction – as the available inventory of existing homes for sale in the region has remained at an anemic 3 months of supply or less for the past two years. Balance for the Triangle’s total housing market is around 6 months of supply. Total new home inventory in the third quarter grew to 7,160 units, a 16% increase over the 6,173 units observed in 3Q16. At the current annual closing pace, this level of inventory accounts for 7.9 months of supply. It is the highest level of inventory supply observed in the Triangle since 2012. The market had 5,240 units under construction representing 5.8-months of supply and 12.3 percent more units under construction than the year prior. The number of Finished Vacant units now stands at 1,613 homes, which is 6.4 percent greater than the number of units observed in 3Q16, but it is 3.4 percent lower than finished vacant units observed in the second quarter. The finished vacant inventory remains at the same level as a year ago at 1.8-months’ supply, which is considered a healthy level.
The Triangle in 3Q17 represents a 10 percent increase from the 16,449 lots surveyed in 3Q16. At the current absorption rate, this inventory represents 18.3 months’ supply of inventory.
Consider that 18-24 months is normal, on average this is the new historical amount of time it takes to entitle and deliver new replacement lots to the market. In high-demand submarkets such as Southwest Wake County, however, the development timeline can be significantly longer than normal due to major capacity constraints on both the public and private side of the equation. Despite constraints, new lot development has been significant in 2017 as construction progress has been aided by dry weather and steady and a growing buyer demand. Over the past four quarters Triangle developers delivered 13,586 new lots, a 43.5 percent increase over the previous year’s total. Lot development at this rate is needed for the market to see production gains.
Production of homes in the Triangle priced below $250,000 continues to decline as the costs of land, construction materials and labor increases. As of the third quarter, the Triangle region had only 5.3 months of inventory supply for units priced under $200,000. Homes priced between $250,000 and $350,000 led the market in terms of production growth rate encompassing close to 37 percent of the Triangle’s total new home inventory supply and 35 percent of all closings in the past 12 months. A sweet spot that some builders may be overlooking, however, is in the $350,000 to $399,000 range which had only 7.2 months of inventory supply available in the third quarter compared to houses priced below and above that range with an 8.3-months’ and 9.6-months’ supply available respectively. The $500,000+ market has been seeing stronger demand growth with annual closings up 36 percent from a year ago currently and starts up 27 percent.
In conclusion Hoyle forecast growth in sales of existing homes in the Triangle will begin to plateau due to an anemic inventory of available homes for sale in the region, new home builders have been ramping up new home lot development and construction starts to take advantage of weakened competition. Available inventory of existing homes in the Triangle has been steady at about 3 months of supply (or less) for more than three years. In contrast, the inventory supply of new homes in the third quarter was at 7.9 months. It is the region’s highest rate of supply since 2012, but it’s still in line with historically accepted levels of inventory.
The supply/demand ratio considered to be equilibrium for the region for both new and existing homes is around 6 months of supply. Plus, as job growth in the Triangle remains steady and unemployment declines, many employers are reporting a need to recruit talent from outside the region, resulting in an in-migration of population seeking housing. Traditionally, many of these new recruits will seek out apartments or rental housing options first, but as area apartment rents increase at an average rate of 5 to 8 percent a year, builders are reporting increased buyer traffic into their model homes and communities from renters ready to take on a mortgage as they seek budget stability and relief from continued rent rate increases. The price differentiation between new and existing homes, at least on a per-square-foot basis, is also narrowing. In Wake County, the average price paid for a new home in the 12 months ended Sept. 30 was $131 per square foot versus existing homes that sold for an average $130 per square foot, according to county real estate sales records tracked.
About HTR Capital Group: HTR is an independent company with local roots and national branches through its membership Referral Exchange, a network of over 20K licensed agents in all 50 states. HTR has strong working relationships with area builders, developers, businesses and city/county/state government officials. HTR believes Customers First is a Win-Win situation! No real estate transaction is too large or too small for the HTR team! For more information, visitwww.HTRRaleigh.com or contact Gregory Buscher, Relator at 919-795-9720 [email protected]
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