SALT LAKE CITY HOUSING 1Q17: Affordability Pressures Rising; Labor Shortages Threaten Production
- 1Q17 New Home Starts Experienced a slightly Deeper than Normal Seasonal Decrease – Down 16% from 4Q16 but up 8% over 1Q16 levels
- Through 1Q17, Annual New Home Starts are up 14% YoY
- The rapid increase in prices and severe lack of available labor continue to be the biggest strains on the Greater Salt Lake housing market; with the pressures of high land prices, low labor and high demand from out of state buyers, controlling costs is very difficult for builders
According to Metrostudy’s quarterly lot-by-lot survey of the Salt Lake housing market, new home production during the 1st quarter of 2017 experienced a normal seasonal decrease; however this year’s extremely wet winter exacerbated this decrease. New home starts during the quarter totaled 2,387, which is a 16% decrease from last quarter, however is 8% above 1Q16. New home closings during the 1st quarter decreased 11% from last quarter, however are up 8% compared to 1Q16 for a total of 2,261. Annual new home starts as of the first quarter totaled 10,852, which is a 14% increase compared to this same time last year. We are now 10 years out from the peak, when annual starts reached 17,608. Annual new home closings totaled 9,946 as of March, which is 12% higher than last year at this time, however well below the peak of 15,485. Annual starts for Single Family detached homes increased 11% compared to last year’s pace for a total of 7,857. Annual closings are up 15% over last year to 7,342. Annual starts for Attached (for sale) homes totaled 2,995, a 20% increase, and closings rose 4%, for a total of 2,604.
“The rapid increase in prices and severe lack of available labor continue to be the biggest strains on the Greater Salt Lake housing market,” said Eric Allen, Regional Director of Metrostudy’s Utah / Idaho offices. “As such, it will become more difficult to maintain the pace of new home production if these issues don’t subside, however there does not appear to be much relief in the near future. Production for new homes above $300k continues to increase at a very rapid pace, while inventory remains well within or below equilibrium. While new home production in the $200k-$300k price segment accounts for 34% of total starts market share, these segments have only grown 6% over the past year. On the other hand, new home starts from $300k- $800k have increased 25% since last year at this time, and account for 57% of all new home starts in the market. With the pressures of high land prices, low labor and high demand from out of state buyers, controlling costs is very difficult for builders.”
The median price for a new Single Family home is currently $355,200, which is 3% higher than last year and .9% above last quarter. The median price for a new Attached unit is $235,700 which is a 7% increase from last year, and up 1.2% from last quarter.
Total new home inventory in the Greater Salt Lake market currently sits at 7.9 months, which is within healthy equilibrium levels. This supply has increased from 7.6 months in 1Q16, for a total of 6,523, a 16% increase over last year at this time. New home inventory for Single Family Detached homes currently sits at 4,306, which has increased 14% from last year, and decreased from 4,317 since last quarter. Labor continues to be short in the market, which has increased the time it takes to build a home, coupled with a heavy winter, the ability to start new homes has waned. We fully expect that under construction inventory will increase as we get further into the spring and summer months. Despite the rapidly increasing production, finished vacant home inventory is not expected to increase much, if at all. Currently, there are only 486 finished vacant single family homes in the entire Greater Salt Lake market, which is a very low .8 month supply. This total is down 18% from last year and increased 3 from last quarter. Under construction inventory for townhome units has increased 35% from a year ago to 1,507, a 7.9 month supply, up from 6.3 months in 1Q16. Finished vacant inventory has decreased 41% from last year to 140, which is a very low .7 month supply. Under construction inventory for Condo’s increased 57% from last year to 387, a 14.5 month supply, while finished vacant inventory decreased 21% to 125, which is a 4.7 month supply.
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