ALBUQUERQUE HOUSING 2Q18: Relative Affordability Keeps the Market Attractive – Builders Need to Deliver Product to Attract Entry Level Buyers
- Quarterly New Home Starts were up 12.9% from 2Q17 levels, while Annual Starts declined 1.1% YoY
- Quarterly Closings have declined 9.6% YoY – likely due to lot constraints, labor shortages and price sensitivity of homebuyers
- The median single-family detached sales price in June 2018, as reported by GAAR is now $212,500, up 6.3% from June of 2017
Metrostudy’s 2Q18 lot by lot survey of the Albuquerque housing market shows that there were 445 new home starts (438 single family detached homes and 7 attached homes), a 12.9% increase compared to 2Q17. Annual starts, including both attached and detached product, however saw a 1.1% decrease; a difference of 18 starts. This small annual decline can be explained by the completion of the Carlisle Condos, which after burning down, began construction again in 2017, greatly contributing to the majority of attached starts in Albuquerque. By removing the attached product from the total number of starts in Albuquerque, starts for single-family detached homes have actually increased both annually, as well as quarter over quarter. Albuquerque single-family detached starts increased +1.6% year over year, a difference of 24 starts.
Builders also closed 388 homes in 2Q18, which were visually inspected and observed by Metrostudy to be occupied at the time of our survey. Compared to 2Q17 this number of closings represents a decline of 9.6%, a decline likely due to both the inability to replace projects that are winding down, i.e. lot constraints, labor shortages, etc. and the price sensitivity of homebuyers. Annually they have also declined 3.6% YoY (1,534 annual closings in 2Q18 v. 1,592 annual closings in 2Q17). Closings have also fallen for single-family detached housing. 346 single-family detached closings were observed in 2Q18, a 10% decrease compared to 2Q17 (385 closings), and a 3% decrease in SFD annual closings (1,436 annual SFD closings in 2Q18 v. 1,482 annual SFD closings in 2Q17).
Starts are currently outpacing closings, which brings into question if there is enough demand to necessitate the number of houses being built. But finished and vacant inventory has remained flat in Albuquerque, and there is evidence of demand in the resale market, so it is unlikely that homebuilders in Albuquerque are at risk of overbuilding. However, it is important that builders remain price sensitive, to expand their buyer pool, attempting to attract the large numbers of entry level buyers in Albuquerque, and to draw people out of the resale market.
“The Albuquerque market continues to grapple with price sensitivity, while the cost to build a home grows simultaneously,” said John Covert, Regional Director of Metrostudy’s New Mexico market. “The first half of 2018 has seen immigration and trade policy changes potentially reshape the national economy and create uncertainties for the home building industry. Immigration policies have restricted and dissuaded individuals from coming to the United States, which has taken a toll on the already tightening labor market. New tariffs on steel and aluminum, in addition to the previously imposed tariffs on lumber, will likely threaten both home builder profitability as well as housing affordability. It remains to be seen how these trade disputes will ultimately affect US jobs, but for now job creation remains strong.”
The Albuquerque resale market remains strong and further illustrates demand for housing exists, despite a slow economic recovery. New listings and days on market both continue to decrease, while home prices increase. The median single-family detached sales price in June 2018, as reported by GAAR is now $212,500, up 6.3% from June of 2017, when the median SFD home price was $199,995. The average SFD sales price currently sits at $244,354, up 0.8% from $242,360 in June 2017, and the highest mark since 2008. While sales were down 4.7% this June as compared to June 2017, YTD sales ending in June are higher in 2018 than last year by 4.2%. With fewer listings on the market it would make sense that June would see a small decline in sales, but because YTD sales are still showing positive growth, demand still exists in the market.
New tariffs and inflation have added to the rising costs in an already constrained industry, so it may be difficult for builders to rationalize the cost of building entry-level homes. But the future of our country’s trade disputes and a shift in government policies remains somewhat unknown, and this uncertainty could affect homebuyer confidence. And even if some builders are unscathed by policy shifts or tariffs, higher costs of other goods and services may hinder consumer spending and impede housing affordability. Albuquerque is however still relatively affordable, especially when compared to other nearby cities, e.g. Denver, Phoenix, Salt Lake City, etc., which remains a positive to try to influence migration back into the state as job growth continues.
For information contact:
John Covert – 720.493.2020 x 201
About Metrostudy: 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
About Hanley Wood: Hanley Wood is the premier company serving the information, media, and marketing needs of the residential, commercial design and construction industry. Utilizing the largest analytics and editorially driven Construction Industry Database, the company provides business intelligence and data-driven services. The company produces award-winning engaging media, high-profile executive events, and strategic marketing solutions. To learn more, visit hanleywood.com.