With new contract and traffic data available for the first quarter this week, Metrostudy's Chief Economist Brad Hunter and regional directors comment on four key housing markets: Houston, Las Vegas, Phoenix, and Southern California. Overall, these markets have had a slow spring start, but Hunter and regional directors are optimistic moving into the second quarter.
Las Vegas, Phoenix, and Southern California have seen slow but steady first quarter traffic (Houston is excluded, as data is not yet available for the end of Q1). All three markets had highest traffic in February. Southern California saw a few spikes, reaching a market average of 67.6 traffic per subdivision, while Las Vegas peaked at 23.47, and Phoenix hit 20.3. Zooming in on these markets depicts a slow start compared to the first quarter of 2013, but that each market is gradually gaining momentum.
Las Vegas is off to a slow spring start with numbers below the first quarter last year. However, sales are catching up to 2013 as the last week of March saw an average of 1.29 sales per subdivision.
"New home sales in Las Vegas have been slow to rebound this year, but some improvement is evident," assures Hunter. "The average community in Las Vegas is now (once again) selling more than four homes per month."
According to regional director Greg Gross, "Las Vegas sales and traffic is trending above 2012 levels but below 2013. Affordability is beginning to have more of an impact here over the past three months. As of this week, it appears the spring selling season is cooling off rather significantly."
Although 2014 started strong, the Phoenix market is another that has seen a slow spring with cancellation rates higher than the first quarter in 2013.
"Phoenix saw an incredible surge of sales in early 2013 that was not matched in early 2014, due to large price increases," says Hunter. "Sales paces have been below normal so far this year in Phoenix. Sales paces, averaging 2.5 per month, are now lower than those from this time of year in either of the last two years."
Rachel Cantor, regional director for Arizona says, "2014 started positive as we saw traffic up about 2% over 2013 numbers. The sales have not occurred leading us to believe that buyers are on the fence about purchasing a new home. Cancellations and conversions also support that buyers are not ready. The builders chatter is that the qualification is the issue buyers are not able to qualify for the homes. Also there are pockets in the valley where builder competition is fierce and price decreases have occurred in order to sell homes. This doesn’t give buyers a positive outlook as they see price decreases and wonder should they wait. Although I haven’t confirmed yet the price decreases have been as statistically significant as the builders claim they have been. I did seen a few subdivisions that had as large as a $20k drop."
Southern California is a market looking up with a spike in the average contracts per subdivision significantly higher than last year, reaching 1.3 in the last week of March.
"Sales had been below 2013’s levels, but have recently caught up. The coastal areas are performing better than the inland areas. The average sales pace is now greater than four per month," notes Hunter.
Steve Johnson, Metrostudy regional director for Southern California adds, "traffic is up per subdivision due to early store closings in 2013 as buyers returned to the market and bought up the inventory. The quality of potential home buyers is up providing better conversion ratios since these buyers are serious to committing to the market. The strengthening economy has lowered the cancellation rate as buyers have become more confident in their decision."
Houston is a consistently strong housing market. In years following the crash, there has been steady growth in new home closings and it remains one of the fastest growing metro areas in the country.
"Houston remains one of the most robust housing markets in the nation. High oil prices are helping support the local economy," Hunter said. "Rapid increases in lot prices and home prices have not slowed sales."
Read more insight from Brad Hunter on first quarter home sales is in his recent commentary here.