Our monthly collection of new-home and lot demand scores from Metrostudy directors in 36 markets illustrates the current climate of the housing market, as well as its continued recovery.
Demand for new homes has made significant strides in the past two years—buyer demand has increased 14.73% since December 2015, when the average score was 6.22 on our 10-point scale, to 7.14 in December 2016. While our latest batch of scores from regional directors show meaningful growth in demand for new homes during December compared with a year prior, average new-home demand across all markets has declined for two consecutive months. Month over month, new-home demand declined -0.77%, and -3.09% from October 2015’s average score of 7.36.
Seasonal slowdown is no stranger to the housing industry, but the recent rise in interest rates—compounded with rising home prices—has likely contributed to the recent decline in home demand. Softening has been seen across the majority of markets over the past two months, and most Metrostudy regional directors did not cite specific labor, weather, or development costs as the reason for taking home demand scores down a notch.
Two exceptions were Austin and Dallas-Fort Worth in Texas, two major markets that regional directors posted down in December. In addition to seasonal slowdown, regional directors believe that price fatigue may have finally set in. In Dallas-Fort Worth, regional director Paige Shipp reports that in addition to lower-than-anticipated sales in the fourth quarter, sales in top communities have also declined as a result of aggressive pricing the past 24 months.
However, the majority of regional directors believe that major inroads have been made, and that builders ended 2016 looking back on a successful year. As the new administration settles in and uncertainty about the future fades, it’s likely that buyer confidence will bounce back.
