ALBUQUERQUE HOUSING 4Q18: Quarterly New Home Market Volume Flat YoY; Closings Outpace Starts as Builders Close Out New Subdivisions

  • Quarterly New Home Starts Flat YoY; Annual Starts Up 4% YoY.
  • Quarterly Closings Flat YoY; Annual Closings declined 4.5% YoY.
  • Resale prices continue to grow, slowly narrowing the gap between new and resale homes, making new home options more attractive and competitive for buyers.

Metrostudy’s 4Q18 lot by lot survey of the Albuquerque housing market shows that 330 new homes were started in the fourth quarter of 2018, of which 304 were single-family detached homes – relatively flat compared to the fourth quarter of 2017. Annual starts for total housing as of 4Q18 were 1,661, an increase of 6.4% compared to 4Q17. There were 363 observed quarterly closings (homes that show visual signs of occupancy at the time of survey) for all housing – attached and detached product, identical to the number of closings in the fourth quarter of 2017. Annual closings were 1,522 as of 4Q18, down slightly by 4.5% compared to 4Q17.

“Closings in this quarter outpaced starts, as predicted based on trends we observed before the recession” said John Covert, Regional Director of Metrostudy’s New Mexico market. “When starts outpace closings for 3-4 consecutive quarters, there will be 3-4 subsequent quarters where closings outpace starts. 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 are closing out. Absent new lot deliveries, this dynamic is likely to persist. Gaps in land development and lot deliveries disrupt the ability to return to normal historical volumes. Starts in the fourth quarter are typically the lowest of the four quarters due to the holidays and weather constraints, so it is not concerning that they are lower in 4Q18 than in the prior quarter.”

In 4Q18, finished and vacant inventory rose significantly, compared to both the previous quarter and the fourth quarter of 2017. Finished and vacant inventory increased 48% YoY; 4Q18 there were 442 units and in 4Q17 there were 299. This rise in inventory is directly correlated to the growing levels in the following projects: Park Place (a condo conversion project – 37 units), Eastland Hills (33 units), Los Diamantes (33 units) and Milagro Mesa (31 units). Builders are confident that these units will close and it will lead to a strong first quarter. While the sharp increase in finished vacant inventory appears to be concentrated in a handful of projects, builders should use caution when pushing spec levels higher until the market absorbs these units.

Vacant Developed Lot Supply (VDL) continues to decline in the Albuquerque MSA, leaving builders to struggle with finding lot / project replacements.  Albuquerque is considered to be in equilibrium with a lot supply between 20-24 MOS. Further out of equilibrium are top producing submarkets that have less than a year and a half of lot inventory: the Northwest, host to major master planned communities Mirehaven and Trails, has 14 MOS; Rio Rancho, host to Mariposa & Lomas Encantadas has 16 MOS; and the Southwest, host to DR Los Diamantes and LGI Desert Sands, has 13 MOS.

The Albuquerque MSA continues to demonstrate stable signs of economic activity, with 10,300 more jobs added to the market YoY and the unemployment rate improving to 4.3%,” said Covert. “While the MSA is highly comprised of government jobs, it is fortunate the job facilities in ABQ were generally unaffected by the government shutdown. New Home market volume remained relatively flat YoY. Lack of lot deliveries and new home options are applying further pressure to volume growth but helping fuel the resale market, which is approaching all-time highs for transactions with tightening levels of listing, now at 2.5 MOS, the lowest since 2005. Median and average resale prices continue to grow, slowly narrowing the gap between new home and resale, making new home options more attractive and competitive for buyers. However, the threat of rising rates may threaten affordability and buyer capacity.”

For information contact:
John Covert – 720.493.2020

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