The annual rate of new-home construction in the Rio Grande Valley as determined by Metrostudy’s third-quarter survey is 1,790 starts, up 137 units, or 8.3 percent, over the 3Q13 rate of 1,653. The Rio Grande Valley had 373 starts in the third-quarter, an 11.4 percent decline from 3Q13. The number of new home closings in the year ending 3Q14 was 1,840, up 104 units, or 6.0 percent, over the 3Q13 rate of 1,736. There were 426 closings in the third-quarter, down 5.1 percent from 3Q13.
Metrostudy’s 3Q14 survey found the level of new home inventory continued to be high relative to the number of closings in the same period. There were a total of 1,262 homes in inventory at the end of 3Q14, which represents an 8.2 months of supply based on the annual closings rate of 1,840. Metrostudy documented 624 homes under construction at the end of the third-quarter, a decrease of 54 units compared to 3Q13. The inventory of finished vacant units totaled 618 homes at the end of 3Q14, up slightly compared to the 3Q13 level of 587, but down from last quarter. Based on the closings rate for the third-quarter, the current level of finished vacant inventory represents 4.0 months of supply; a significant oversupply compared to current demand.
It is important to note that the top 55 most active subdivisions ranked by annual starts have a 42.9 months of supply. This is a much healthier level by far when compared to the overall 101.1 months supply. This is important as it leads to a discussion of a small core group of active subdivisions and large group of fairly inactive subdivisions. The top subs group have a starts rate of 927 and a current developed lot supply of 3,314.
“The Rio Grande Valley area continues to lag behind the rest of the state in terms of economic and housing activity and total recovery from the bottom of the recession,” said Jack Inselmann, Metrostudy’s regional director for the Rio Grande Valley market. “However, the analysis shows consistent though small growth—a much needed improvement over the last few years. Inventories are improving, prices are rising, and there is a good pocket of construction in a small group of subdivisions. In the near term the RGV housing market overall analysis will look somewhat mediocre except for the core group of subdivisions that generates approximately 50 percent of all new home construction and holds tighter inventories and exhibits better trends. There are still issues with excess housing inventories in both the new home and resale markets, as well as foreclosure inventory. Complete recovery doesn’t occur until inventories are brought back in line with demand, and that still remains somewhere down the line. It is expected that The Rio Grande Valley will remain a smaller market that hopes for steady growth and improvement in all facets of production and inventories. Current trends shows that is happening and that is the best positive statement of all for this region.”
Contributed by Metrostudy.