AUSTIN HOUSING 3Q16: Austin Poised for a Banner Year – Annual Starts Rate at Highest Level since 2006

  • The annual starts pace is now at the highest level since 1Q06
  • Demand shows no signs of easing, and supply is catching up – the challenge is in the product mix. The major bulk of activity in Austin is below $300,000 and the big winners so far in 2016 are builders offering smaller product that meets the budget and lifestyles of emerging family types.
  • To combat the growing affordability gap, some builders are pursuing strategies to “de-feature” current plans, removing features where they can to reduce prices. We are also seeing new attached product, ranging from duplexes to townhomes to condominiums.

Metrostudy’s 3Q16 survey of the Austin housing market shows that new home starts shifted into high gear over the summer, reaching 4,067 – the highest number in six years, and approaching the 2006 peak (4,387 in 1Q06). The third quarter numbers are indicative of builders ramping up spec inventory to meet year-end sales goals. The annual starts pace is now at 13,402, the highest in almost nine years.

With strong demand, the annual closings pace grew to 12,757 by the end of the third quarter, a 5.8% increase from the second quarter and up 18.4% year over year. Third quarter closings totaled 3,499, up 25.4% compared to the third quarter of 2015, but only 100 closings higher than second quarter figures. While overall housing inventory levels remain healthy—at 7.2 Months of Supply (MOS)—some submarkets are extremely tight.

Once again, the bulk of the annual starts (4,653) for third quarter were located in the North; seven of the top ten subdivisions and more than a third of the starts activity in the quarter was in the North submarket. The North also has the largest number of model homes (178), significantly higher than its next most competitive submarket, the Northwest (143 models). The Northwest clocked in second with 2,597 annual starts. Home shoppers who want to be in emerging markets like Leander and Liberty Hill now have a plethora of new home choices.  Significant starts activity also was observed in the South submarket. While a much smaller market overall, the annual starts pace in the South reached 1,869, an increase of 27% year over year.

“Though Austin is growing more competitive given the recent and pending opening of new subdivisions as well as new builders in the market, overall the market is performing well,” said Vaike O’Grady, Regional Director of Metrostudy’s Austin market. “Demand shows no signs of easing, and supply is catching up. The challenge, if there is one, is in the product mix. The major bulk of activity in Austin is below $300k – which used to be a single family home on a traditional 60’-70’ wide lot. And there are still many builders in the market who are duking it out where the air is thin, with “heritage” product to suit traditional families. The big winners so far in 2016 are the builders offering smaller product that meets the budget and lifestyles of emerging family types. It’s interesting to note that the top ten builders with base prices below $300k had 5,639 annual closings in third quarter of 2016; that’s nearly half of the entire market! Those experiencing significant sales gains are the builders who have figured out how to accurately target key demographics and psychographics within their submarkets.”

According to The Real Estate Center at Texas A&M, overall annual home sales in 2015 approached peak (2006) volume; there’s little reason to expect that Austin won’t meet or exceed that level this year. However, back in 2006, the median price for a home in Austin was $141,095. According to the Austin Board of Realtors (ABOR), the median home price in September to $275,250, climbing 8 percent year over year. ABOR also reported a very tight housing inventory of 2.7 months.

“To combat the growing gap between average salary (currently $53,030) and escalating home prices, some builders are pursuing strategies to “de-feature” current plans, removing features where they can and thus reducing prices,” said O’Grady. “Additionally, builders are designing new attached product, ranging from duplexes to townhomes to condominiums. As of the third quarter, there were 1,530 annual closings on lots smaller than 40’ wide! That’s quite a shift for Austin, though of course, not every builder can or should move in this direction.”

As 2016 ends, we can expect even more activity on the suburban edges. ABOR’s September report indicated that less than one in five homes in Central Texas were sold in the City of Austin. Large communities are coming online in San Marcos, Dripping Springs, Manor and Del Valle. Communities like Georgetown, Pflugerville, and Leander are maturing, adding amenities and services to entice future homebuyers. And the Central submarket continues to be a hub of teardown, infill activity, pushing prices northward. With no significant headwinds, and with growing offerings below $300,000, Austin is poised for a banner year.

For information contact:
Vaike O’Grady – 512-473-2250
vogrady@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood
Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

 

 

 

 

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