Metrostudy, a housing information and consulting firm, reported that their second quarter survey of the Austin market counted as many new home starts as the second quarter of 2013.  The fact that the starts total in the last three months matched that of the second quarter of last year shows that the effect of a shift in new home pricing is starting to impact the expansion of Austin’s new home market.  “This time last year 11% of new home starts occurred below $150,000, a volume oriented price point.  Today that percentage is nearly a third of what it was last year based on where pricing fundamentals have pushed builders and developers,” said Madison Inselmann Regional Director of Metrostudy’s Austin market. 

Austin builders started 2,688 new homes in 2Q-14, matching the number reported from 1Q-13.  Austin builders started 9,716 new homes in the last twelve months, representing a 7% increase year-over-year.  At the same time, area builders closed 2,446 new homes in the last three months, 10% more than the second quarter of last year.  Over the last four quarters, builders have closed 9,203 new homes, a 14% increase over the prior four quarters.  “The second quarter was a fast moving time for Austin builders, fielding strong traffic through the sales offices and opening new sections of lots,” remarked Inselmann.

“In terms of lot production, Austin is having a banner first half to be sure.  We welcome the new home sites, as it was about six months ago that the lot shortage was constraining the market’s ability to grow,” says Inselmann.  In 2Q-14, area developers delivered 3,157 vacant developed lots.  The second quarter’s strong delivery brings the 2014 year-to-date delivery count to 6,007, a total that is higher than the twelve month total in both 2011 and 2012.  As a result of the strong first half delivery, Austin’s VDL count declined only 2% to 14,910.  “The first half lot delivery breeds confidence that even if builders can’t meet all the demand, they should be able to improve upon last year’s mark.” 

Austin’s housing inventory levels remain healthy for a growing market with builders currently holding 4,924 homes in inventory, a 6.4 month supply.  The number of homes sitting finished and vacant in 2Q-14 declined 6% from the first quarter of the year.  “While a growing number of finished and vacant homes is an indicator of a slowing market, in a market that is so supply constrained in all kinds of available housing (new, resale, rental), as Austin is, these finished and vacant homes could provide a new option for the many folks that are moving to Austin each week,” reports Inselmann.

“In the last twelve months we’ve started 22% more homes between $500,000 and $750,000 than we have below $150,000.  That right there tells you all you need to know about the shifting fundamentals in the Austin market.  Permitting and development costs, not to mention the growing land pricing, are pushing Austin away from the market below $150,000, historically the entry-level market.  The strength of the local job market, in addition to the voluminous in-migration, insures that we see sufficient demand for these higher price points.  That being said, our growth rate will be tempered slightly by the absence of the volume-priced market,” concludes Mr. Inselmann.