Metrostudy’s 2Q14 survey of the Orlando housing market showed 2,374 single family housing units started in the four counties of the Orlando MSA (Lake, Orange, Osceola, and Seminole). This represents a decrease of 2.0% compared to last year’s quarterly starts rate of 2,422 units.
The annual starts rate of 9,460 units has increased by 18.3% over the past year. Single-family quarterly closings totaled 2,381 units, 19.2% higher than 2Q13. The annual closings rate (past 4 quarters) of 8,779 units is 28.3% above the rate of 6,845 units per year recorded a year ago.
Quarterly closings in Orlando continued the upward trend, although new construction activity slowed slightly from the first quarter. The flat trend in starts was echoed by many of the major markets in the southeast United States. With the growth in retail home pricing over the past year and the lowering of FHA lending limits, we expect uneven growth in activity over the next few quarters.
As in other parts of the country, the Orlando area is seeing a precipitous drop in new home construction at the lower end of the market, with annual starts under $150k down almost 60% from the annual rate as of 2013.
“Strong new home construction activity for the past 18 plus months has spurred increases in retail pricing, often at a rate near the peak of the boom,” said Anthony Crocco, Regional Director of Metrostudy’s Central Florida market. ”Pricing has also been impacted by increasing labor and material costs, impact fees, and lot costs for both progressive lot takedowns and replacement projects. Buyers must get over the sticker shock of these elevated prices. To continue to increase construction activity, builders must help the consumer prepare, and many builders are through the use of incentives.”
Total single-family inventory, which is comprised of units under construction, finished vacant units and models, equaled 5,142 units at the end of the second quarter, 7.0 months of supply. Housing inventory increased by 15.3% compared to last year. Under construction housing inventory rose by 147 units to 2,931 units over the past year. Finished vacant inventory increased from 1,343 units last year to 1,848 this year.
This quarter, 1,796 lots were
delivered to the Orlando MSA versus 915 lots a year ago. Vacant developed lot
inventory stands at 24,789 lots, a decrease of 6.4% compared to 26,477 lots
last year. Based upon the annual starts rate, this lot inventory represents
31.4 months of supply, a decrease of 8.3 months from last year. The number of
units in housing inventory has increased over the past year, while the move-in
pace has also grown. Both the number of units under construction and finished
but vacant have grown, however the ratio is in equilibrium for the market. We
do not expect the finished supply to increase significantly over the next few
quarters as closings should remain strong.