DENVER HOUSING MARKET 1Q16: Strong Demand Drives Starts to Highest Level Since 2007
- 1Q16 Annual New Home Starts Up 26% YoY, reaching the highest level since 2007; Quarterly New Home Starts Up 47% YoY.
- Homes priced above $400K represented 60% of the market in 1Q16, an all-time high fueled by steady demand from move-up buyers and rising building costs.
- As pricing increases and inventory continues to tighten, the industry will push toward more attached (condo, townhome, or paired) units, which saw total inventory up 18% YoY, the largest annual percentage increase since 2005.
MAY 2016 – According to Metrostudy’s 1Q16 lot-by-lot field survey of the Denver market, 2,413 homes were started in the first quarter, up 3% from 4Q15 and an increase of 47% from 1Q15. Annual starts as of 1Q16 were up 26% to 9,869 homes, the highest level of starts since 2007 and nearly half of the previous peak of 20,000 starts. Builders also closed 2,141 units in the first quarter, an increase of 29% from 1Q15 and annual closings in 1Q16 totaled 8,641 units, a 23% increase YoY.
“Demand is very strong in Denver and builders are pressed to get homes started and delivered as quickly as possible,” said John Covert, Director of Metrostudy’s Denver market.
Homes priced above $400K represented 60% of the market in 1Q16, an all-time high fueled by steady demand from move-up buyers coupled with the rising costs of land, development, and materials. For many prospective entry-level or first-time buyers, few options exist for new home detached product, thus the industry will continue to push toward more townhome and paired product in suburban as well as in-fill locations. It stands to reason that the average new home sales prices continue to push higher, now at $503,768 for the trailing 12 months ending in March 2016.
In 1Q16, there were 11,494 vacant developed lots (VDL) in the Denver Metro Area, a 4% decline from 1Q15, a reflection of the sharp increase in housing starts in the quarter. But, the decline in vacant lots is also influenced by lot deliveries, which are also down 9% for the year to 6,937 lots. With builders starting about 600 more homes than lots delivered in the last year, lot supply has managed to get even tighter, now at 18 months, despite efforts to get new projects started. Metrostudy considers 18-24 months of lots to be equilibrium for the entire market.
At the end of March 2016, total inventory – under construction, finished and vacant, or model homes – numbered 6,859 new homes, up 22% from a year ago and up 4% compared to last quarter. Of that total, 4,893, or 71%, are single-family detached (SFD) units. Inventory levels for SFD are at 8.8 months compared to 8.5 months a year ago – and above the 7.0-8.0 months considered to be equilibrium for SFD total housing inventory. Inventory levels were expected to increase due to seasonal norms when builders pour foundations in the early part of the year. Once the homes that were started in the first quarter are delivered, months of supply will likely fall back to equilibrium levels. There are another 1,966 attached units – condo, townhome, or paired units – in total inventory, up 18% from 1Q15, the largest annual percentage increase since 2005.
Metrostudy continues to expect expects steady increases in starts and closings volume to continue in the quarters ahead with builders completing more than 10,000 homes for 2016, which would be half of the previous peak and an important milestone reached for the industry.
For information contact:
John Covert – 720.493.2020 x 201
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, 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
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