NASHVILLE HOUSING 1Q17: Despite Strong Growth, a Continuing Lot Shortage Threatens Future Growth

  • New Home Starts in 1Q17 were up 29.9% YoY – the highest level of first quarter starts in over eight years
  • Annual New Home Starts are up 19.7% from 1Q16 levels
  • The Nashville MSA is facing a severe lot shortage – the Vacant Developed Lot Supply is at an all time record low

Metrostudy’s survey of the Nashville housing market showed that the Nashville MSA recorded 2,179 Quarterly Starts in 1Q17, up 29.9% year over year from 1Q16, and has reached its highest first quarter level in over eight years. Annual Starts from the past 12 months ending in March 2017 were at 9,102 units, up 19.7% over 1Q16 levels. The Nashville area recorded 2,207 Quarterly Closings in 1Q17, up 37.2% YoY from 1Q16. Annual Closings for 1Q17 were up as well at 8,314 new homes sold during the past 12 months, up 24.6% YoY from when closings ended 1Q16 at 6,673 units sold.

The uptick in construction starts also increased the total number of units currently under construction. Units Under Construction increased by 17% year-over-year and now stands at 3,883 units, but declined from the past quarter by 230 units. Total housing inventory, which combines model homes, units under construction, and finished vacant units, increased by 19% year over year to 5,130 units. Although total housing inventory rose above last year’s number, the months supply for total housing inventory has declined from 8 months to 7.4. Equilibrium for the regions is a level of 7 to 8 months.

Perhaps the most important metric used to measure the health of housing inventory levels is the Finished but Vacant housing inventory months of supply (FV MOS). The region’s finished housing supply inventory rose to 1072 units, a 27% increase YoY and a 23% increase from the past quarter. Finished Inventory now stands at its highest level in five years, but the finished inventory months supply remains low at only 1.5 months supply, and reflects the continued strong demand for new homes. One year ago the FV months supply was, 1.3 months. Equilibrium for the region is about 2 to 2.5 months of finished supply.

“The Nashville region continues to suffer from a lot shortage,” said Eugene James, Director of Metrostudy’s Nashville market. “We had 8,973 new lots delivered over the past 12 months ending in March 2017, substantially higher than last year’s numbers, but still not at the levels we need. The VDL count ended the quarter at 9,021 units. The VDL months supply continues to slip, as well, down to 11.9 months, which is an all-time record low. One year ago, the VDL MOS was at 14.4 and two years ago, it was at 21. A normal months supply of finished lots for the Nashville region is from 18 to 24.”

Metrostudy is tracking over 48,800 potential (Future) lots in various stages of development, but about 70% are still in the raw land stage. The other 30% are active but the process of getting them delivered and ready to be built-out has been slower than in the past. Skilled labor shortages, municipality issues and higher material cost are partly to blame but whatever the cause, the delivery of additional finished lots is not keeping pace with the demand for them.

For information contact:
Eugene James @ 404.510.1080
email ejames@metrostudy.com

About Metrostudy: Metrostudy, a Hanley Wood company, 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 that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood: Hanley Wood, LLC is the premier media, event, information and strategic marketing services company serving the residential, commercial design and construction industries. Through its operating platforms, the company produces award-winning digital and print publications, Newsletters, websites, marquee trade shows and events, Market Intelligence data and strategic marketing solutions.

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