According to Metrostudy’s quarterly survey, 507 homes were started in 2Q16, up 37% from 1Q16, and up 24% from 2Q15. The 2Q starts were the highest number of homes started in any quarter since the first quarter of 2010, when the first-time home buyer tax credit was implemented to stimulate housing following the recession. There were 1,629 annual starts in 2Q16, an increase of 14% from 1Q15. This mid-year mark is roughly on pace for the 2016 housing start forecasted by Metrostudy late last year, which estimated a 10% growth in volume, the foundation of which is based on modest economic growth and improving resale market.
“The majority of home starts are still under $250k in the Albuquerque market, but just barely, accounting for 51% of the activity over the last 12 months compared to 56% for 2Q15 annual starts,” said John Covert, Regional Director of Metrostudy’s Albuquerque market. “Several forces are contributing to this shift including higher costs (land, materials, labor), move-up and move-down buyers that have equity and capital and are purchasing more expensive homes, and prospective first-time or entry-level buyers who remain unable or unwilling to purchase a home. To that end, home starts with base prices below $200k now represent 22% of the market, which is the lowest share of activity on record.”
Annual Starts By Price Range, Attached/Detached
Homebuilders continue to pay close attention to the steadily improving resale housing market in Albuquerque, which has experienced its fifth consecutive year of sales volume increases. Year- to-date sales are up 11% versus last year and annual sales are at their highest level since 2007 to 11,299 closings, a 15% increase. Of equal importance, active listings have fallen to near 10-year lows, to 3,919 listings, down 13% from a year ago. As a result, the supply of listings dropped from 5.5 months a year ago to 4.2 months, a much more balanced market that should help push home price appreciation toward more sizeable gains in the year ahead. Median home prices are up 4.3% over the year to $199,000, the highest level since 2008.
Metrostudy counted 6,579 ‘shovel ready’ lots compared to last June. This count does not include Rio Rancho Estates, Vista Entrada Estates, and N. ABQ Acres, but it does include all of the lots in the East Sandia area as well as Valencia County. Based on a trailing 12 month starts pace, there is a 52-month supply of vacant developed lots, which is the lowest since early 2008 but still well above the 20-24-month equilibrium for the market. If the lots are divided into two groupings, one of less than 60’ of frontage and one with greater than 60’ of frontage, the smaller ‘production’ lots, drops to 1,813 lots for a 24-month supply. Lot deliveries are down 30% versus last year and remain well below lot absorption so Metrostudy expects lot supply to tighten further, particularly as home starts continue to grow.
While the overall number of homes in inventory hasn’t changed much in the last year, variations can be seen when segmenting inventory by price range. The price ranges with the most noticeable change over the year was for homes priced from $150k to $199,999, which saw inventory drop from 199 units in 2Q15 to 134 units in 2Q16, a decline of 33%. This total includes any model homes, finished vacant units and those that are under construction, and represents a segment of the industry at risk for larger price increases when new lots must be developed at higher prices than the remaining legacy lots once demand returns at the lower price points. All price ranges above $200,000 have experienced increases in inventory, but months of supply has fallen in the $250,000 to $399,999 range as 2Q16 annual closings have been particularly strong in these segments.
Annual Change in Total Housing Inventory by Price Range
“Albuquerque has seen more starts in the 2nd quarter than it has in some time – a bright spot for the industry and the local economy to be sure,” said Covert. “Additional housing activity, even modest growth, can accelerate an underperforming local economy creating jobs in the trades, manufacturing, transportation, finance, and retail industries. Even improving price appreciation for existing homes will help cultivate remodeling projects as people take equity from their homes to start long overdue home projects, which will further add to the local economy’s recovery. Housing may yet become the cornerstone of Albuquerque’s long overdue recovery.”
For further analysis of the Albuquerque market, reach out to senior director John Covert: firstname.lastname@example.org