Metrostudy’s 2Q16 field survey found that the Nashville MSA recorded 2,320 residential construction starts in the quarter, up 11% from 2Q15 and the highest number of quarterly starts in over seven years. Annual new home starts ending June 2016 numbered 7,843, up 17% YoY. Quarterly closings numbered 1,993 in 2Q16, up 38% YoY, and annual closings for 2Q16 came in at 7,229 new homes sold during the past 12 months, up 18.6% YoY.
“Simple demand and supply has translated to higher land and finished lot prices and eventually into higher new home prices,” said Eugene James, Director of Metrostudy’s Nashville market. “The single family detached median new home price in 2Q16 was $335,700 and the average price was $381,100, reaching a new record high. With prices above the $300s, affordability may soon become an issue.”
Vacant developed lot inventory (VDLs) totaled 9,201 units, about the same as 2Q15 levels, but represents a decline of 9% YoY. The VDL months of supply declined to 14.1, and is now the lowest on record. A normal months supply of finished lots for the Nashville region is from 18 to 24 months. The finished lot supply has been low all year and dipped into the severe lot shortage category just about one year ago.
“The biggest challenge for the new home market in Nashville is its lack of Vacant Developed Lots, which is now at its lowest level on record,” said James. “We will continue to have more lots delivered but it could take until 2017 before the supply is more balanced. Meanwhile, look for home prices to continue to rise.