• Annual new home starts up 3.9%
  • Annual closings up 14.7% year-over-year
  • Quarterly starts flat
  • Quarterly closings up 1.3% year-over-year
  • Total finished vacant inventory trended upwards for the last two years, but the trend has reversed over the last three quarters, a positive trend for market health and risk.
  • Lots on the ground are down 10.2% year-over-year, with significant shortages in high demand locations, which has driven some new lot production

Metrostudy’s 2Q16 survey of North Carolina’s Triad region shows that Annual Starts numbered 2,739 in the Triad in 2Q16, up 3.9% from 2Q15. Annual Closings numbered 2,749, a 14.7% increase YoY. The Triad had 856 quarterly starts, essentially equal to the 857 starts in 2Q15, and 718 quarterly closings were up 1.3% from the same period last year.

In 2Q16, total inventory, which includes model homes, finished vacant homes, and homes under construction, totaled 1,855 units. Based on the closing pace over the past 12 months, the Triad now has an 8.1 months-of-supply of new homes. While high compared to national ranges of inventory considered normal (6-7 months), this is still below the average months’ supply that Metrostudy has observed in the Triad in 8 years. The 595 finished vacant homes on the ground in 2Q16 represent a 2.6 months’ supply and are down 8.5% from the 2Q15 total. The 1,182 homes under construction in 2Q16 represent a 5.2 months’ supply, and is 4.9% higher than the 1,127 units under construction in 2Q15.

Annual Starts and Closings

“While months’ supply of finished vacant inventory is low for the Triad, the number remains high by national and regional standards. Some of this can be attributed to new homes that banks were forced to take back and have yet to be disposed of, but some of it has been driven by new construction,” said Jay Colvin, Director of Metrostudy’s North Carolina Triad region. “Total finished vacant inventory had been trending upwards for the last two years, but that trend has reversed over the last three quarters. Since Metrostudy considers this inventory category to be a critical measure of market health and risk, it is considered positive to see the level of finished inventory moderate. A finished vacant supply between 2 and 2.5 months usually correlates with stronger pricing power and fewer incentives.”

The 9,305 lots on the ground in the Triad in 2Q16 are 10.2% less than the number of lots on the ground in 2Q15. This represents a 40.8 months of supply at the current start rate. Even though this figure is well above the 18-24 month range that Metrostudy considers normal for lot supplies, there are shortages of lots in the highest demand locations, and that has driven some new lot production. Over the past 4 quarters ending 2Q16, 1,679 lots were delivered to the market, 4% lower than the total recorded the same period last year.

Construction on 494 townhomes started over the four quarters ending 2Q16, a 2.5% increase from the 2Q15 trailing four-quarter total. Construction began on 151 townhomes in 2Q16, 4.4% fewer than the number of units started in 2Q15. Annual townhome closings numbered 514, a 7.3% increase from 2Q15 figure and, in 2Q16, 131 townhomes were closed, 3.7% fewer than in 2Q15.

Additional commentary on the Triad’s submarkets:

  • Guilford County, which captures 35% of the Triad new home market’s starts, started 970 new homes over the previous four quarters, down 3.8% from the same period ending 2Q15. The 1,010 closings observed over the last four quarters were 4.3% greater than the same period a year ago. The 760 homes of total inventory represent a 9-months’ supply, lower than the 9.9 months’ supply observed in 2Q15. Homes priced in the $400K to $499K price segment has a 12.8 months’ supply, well above the level Metrostudy considers normal for this segment. The county continues to be the leading developer of lots: 897 lots have been developed over the past four quarters, which is 53% of the Triad’s total lots delivered over the past four quarters.
  • Forsyth County made up 28.6% of Triad new home activity through 2Q16. The county saw 783 new home starts for the four quarters ended 2Q16, down 16.5% from 2Q15, and 863 new homes were closed in the trailing four quarters ending in 2Q16, up 6.8% from 2Q15. New production increased significantly in the $200K to $249K price segment (starts up 81%), pulling up inventory in the short term, while inventory in the $400,000 and above segments remain well above levels that would indicate a need for increased production in the near term.
  • Alamance County’s pace of new home construction accelerated further in the Second Quarter. The county started 550 homes in the four quarters ended 2Q16, which is 41% more than the same period a year ago, and 462 homes were closed in the four quarters ended 2Q16, a 24.5% increase. All of the gains in activity were in homes priced between $100K and $400K. The largest nominal gain was recorded in the $150K to $199K segment, which has driven supply levels in this price range up to a 9 months’ supply for product between $150K and $199K.

For further analysis of the Triad market, reach out to regional director Jay Colvin: