Metrostudy’s 3Q14 survey of the Orlando housing market—including Lake, Orange, Osceola, and Seminole counties—shows that 2,614 single-family housing units were started in the quarter, a decrease of 6.6 percent compared to 3Q13.  The annual starts rate of 9,286 units has increased by 4 percent over the past year. Single-family quarterly closings totaled 2,505 units, up 9.2 percent over 3Q13. The annual closings rate (past four quarters) of 8,987 units is 18.3 percent above the rate of 7,596 units per year recorded a year ago.

Third-quarter starts in the Orlando MSA are the second highest in this upward cycle, and rebounded from a slight decline in second quarter compared to 1Q.  Third quarter closings continued a strong growth trend. The chart below shows the price distribution of annual housing starts in the Orlando MSA through the third quarter of this year compared to the three previous years. New-home pricing continues to grow, although not quite as fast as the previous year.

“Closings in the upper price points are lagging starts,” said Anthony Crocco, director of Metrostudy’s Central Florida region. “This is partially related to base pricing growth, which has slowed, and the time it takes for the closings to catch up with the starts. But it also indicates higher true inventories in the upper price ranges, which is not uncommon. Total single-family inventory equaled 5,262 units at the end of the third quarter, or 7.0 months of supply. Housing inventory increased by 6 percent compared to last year.”

Under construction housing inventory rose by 54 units to 3,136 units over the past year. Finished vacant inventory increased from 1,448 units last year to 1,763 this year. This quarter, 2,562 lots were delivered to the Orlando MSA versus 1,735 lots a year ago. Vacant developed lot inventory stands at 24,669 lots, a decrease of 2.9 percent compared to last year. Based upon the annual starts rate, this lot inventory represents 31.9 months of supply, a decrease of 2.3 months from last year.

Both housing and vacant lot inventory levels are in good condition. Finished home supply is down from last quarter.  Under construction inventory levels increased a bit, but are still in equilibrium, and less worrisome since finished units declined.  Lot inventories are nearing equilibrium for the Orlando MSA, although lots are needed in most of the top selling areas. Lot delivery rates have increased and almost equaled starts last quarter. We expect deliveries to continue to grow over the next few quarters, at least.

The Orlando MSA’s new housing industry is healthy in spite of slower growth. New housing starts have flattened as inventories are near equilibrium and pricing growth over the past 18-24 months has slowed new-home sales paces. Still, closing paces remain strong and builder profit margins are good. 

Builders are feeling pressure on pricing as they are having to replace lots bought during the recession with more expensive, newly develop lots in the same general areas. Builders are doing that, but also reaching further out to produce more affordable housing options.

MARKET HIGHLIGHTS

The top three market areas and sub-markets based on annual starts are shown below.

Market Area Annual Starts (% Chg)

Orange ............................... 4,237 (-5.4%)

Osceola........................... 2,644 (+40.5%)

Lake................................ 1,779 (+17.7%)


Sub-Market Annual Starts (% Chg)

SW Orange ..................... 1,632 (+12.3%)

South Orange .................... 1,251 (-0.4%)

Clermont/South Lake..... 1,153 (+10.1%)


The following table identifies the top ten communities as defined by annual construction starts.

Community                    Annual Starts

Lake Nona DRI (Orange) ................. 452

ChampionsGate (Osceola)............... 239

Wyndham Lakes Estates (Orange)..201

Heritage Hills (Lake) ....................... 178

Windermere Trails (Orange) ........... 177

Summerlake     (Orange)..................... 161

Tapestry DRI    (Osceola) ................... 155

Eagle   Creek   (Orange) ...................... 155

Millenia Park (Orange)....................142

Waterside Pointe (Lake) ................. 140

Contributed by Metrostudy.