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%