The cold can’t keep buyers away in the Rockies. The Boise, Denver, Salt Lake City, and St. George markets collectively saw significant closings in the new home market throughout 2014, and while some of the Nation’s hottest metros had a slower end to the year, the area kept a steady sales pace in the fourth-quarter with promise of continued momentum into this year. While prices have spiked enormously in markets seeing similar demand nationwide, most of the Rocky Mountain region held price points somewhat steady throughout the year. What’s the secret to the four metros set-up for solid sales numbers in 2014? Here are some of the trends.
Catering to the Current Consumers
Although prices didn’t skyrocket in the Rocky Region in 2014, affordability for the entry-level buyer was not the the easiest mark, and builders knew it. In the Denver market, for example, fourth-quarter closings out-paced the third-quart by about 300 new homes despite a decrease in new homes under $300,000. Only 16% of new homes in the market sold for less than $300,000 in 2014, compared to 26% in 2013 and 41% in 2012. So, builders have catered most directly to the market’s move-up buyers. In the Salt Lake area, while a strong 2013 led to a year-over-year decrease in single-family starts for 2014, attached starts rose 28% from the last quarter and 10% over last year, and closings in the fourth-quarter kept up overall with the third, declining by just 7 closings.
Gainfully Employed Economies
While this is outside builders’ control, there’s no underestimating the impact low unemployment and steady job growth will have on a healthy new home market. All four of the Rocky markets featured here have below national unemployment (and all below 4% unemployment at the end of 2014). The Greater Salt Lake area saw an additional 5,000 jobs created as of November compared to last year’s 22,500. Boise is at a 2.4% annual job growth rate as of the fourth-quarter, Denver experienced its third consecutive year of a job growth rate north of 2.5% in 2014, and St. George has held a rate of more than 5%.
Lots of Keeping Up
Lot supply presents both opportunities and challenges in these Rocky Mountain markets. A key to success in these markets has been a lot delivery pace that keeps up with starts. In Denver, lot deliveries outpaced starts for the first time since 2007—lot count decreased 7%, but starts grew 19% for the year. The problem here is that lots for homes under $250,000 are hard to come by in Denver, but supply for the move-up buyer remains healthy. In the Salt Lake City area, VDL inventory was up in 2014 by 5% from 2013, but desirable lots are still in short order. With Denver as the exception, the other three markets saw an increase in months supply of Vacant Developed Lots (VDLs) year-over-year from 4Q13 to 4Q14.
Regional Builders Steal the Show
While Richmond American Homes led closings in the fourth-quarter in Denver, the other three markets were dominated by closings from some regional builders. CBH Homes led closings for the quarter in Boise with 119 closings in Boise City, Ivory Homes led the market in Salt Lake City with 82 new homes closed, and Ence Brothers Construction Inc. led in St. George with 39. For a market like Salt Lake where DR Horton and MDC still have a presence, it was a quarter for the smaller guys to shine.