ALBUQUERQUE HOUSING 3Q18: Starts Reach Highest Level Since 2Q08, Outpacing Closings as Builders Ramp Up New Subdivisions
- Quarterly & Annual New Home Starts had highest numbers since 2Q08.
- Quarterly Closings declined 3.4% YoY; Annual Closings declined 3% YoY
- Albuquerque still remains affordable, but there is a marginal shift towards higher price segments: new homes priced over $250K were 63.82% of the market, up 6.321% YoY.
- The home building industry continues to face challenges going into the end of 2018, but Albuquerque’s economy is improving incrementally each year and recent interest from large companies, including Netflix, is a good catalyst for future economic growth and housing demand.
Metrostudy’s 3Q18 lot by lot survey of the Albuquerque housing market shows that there were 468 new home starts, of which 453 were single-family detached (SFD) homes and 15 attached homes. The 453 SFD starts in 3Q18 represents the highest number of quarter starts for single-family homes in Albuquerque since 2Q08. Annual starts for single-family detached homes in 3Q18 were 1,615, the highest number of annual starts since 2008. While both quarterly and annual starts increased this quarter, Metrostudy is reporting a decline in both quarterly and annual closings. Builders closed 370 detached homes in 3Q18, down 3.4% YoY. Annual SFD closings as of 3Q18 were 1,423, 3% less than annual closings reported in 3Q17.
“Typically, when starts outpace closings and finished vacant inventory increases, it is a sign of potentially overbuilding the market. But not only is Albuquerque still undersupplied, Metrostudy has also observed that, since the end of the recession, this market has a general trend wherein starts will outpace closings for 4 to 5 quarters consecutively, and then for the 4 to 6 subsequent quarters, closings will outpace starts,” said John Covert, Regional Director of Metrostudy’s New Mexico market. “The quarters in which starts outpaced closings are likely the ramp up period to building new subdivisions, and conversely the quarters in which closings outpace starts indicate those subdivisions closing out. Because large projects have recently finished in this market, it would indicate that the recent uptick in both starts and finished vacant inventory this quarter and last are the ramp-up period to replace those projects. Builders still have to be price sensitive in this market when building new homes, but it is likely we will begin to see these homes close heading into 2019.”
While Albuquerque still remains affordable, there is a marginal shift towards higher price segments in the market. In 3Q18, there were virtually no single-family homes started with a base price range less than $149,999. Home starts with a base price over $250K are now 63.82% of the market, a 6.31% increase from 3Q17. In 3Q18, 36.2% of homes started had a base price less than $225K, dropping from 42.5% of the market in 3Q17. In the resale market, the average sales price for SFD homes was $239,282 in September 2018, compared to $235,197 in September of 2017. In 3Q18, the average SFD sales price YTD was $240,294, a 2.9% increase compared to YTD 2017. Price increases are likely to continue, as it simply costs more to build a home, but builders would be wise to keep the gap between resale and new construction low to draw out buyers from the resale market or attract potential entry level buyers.
“The home building industry continues to face challenges as we head into the end of 2018, as the labor market remains tight, costs to build a home increase, and mortgage rates are rising at a time when affordable housing inventory is low,” said Covert. Albuquerque’s economy is improving incrementally each year and large companies are beginning to see Albuquerque’s value in terms of affordability, providing New Mexico with unique opportunities for growth. With Netflix expressing intent to purchase Albuquerque Studios, 500-1,000 new local jobs would be created and it is estimated to generate $24-$50 million in annual spending on goods and services within Albuquerque, according to UNM’s Bureau of Business & Economic Research. This and other future announcements would be a good catalyst for future economic growth and housing demand.”
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.