AUSTIN HOUSING 1Q18: Homes are Selling at a Record Pace; Attached Home Activity Surges

  • 1Q18 saw 4,064 new home starts – up 17.6% YoY; Annual new home starts are up 4.5% to 16,457
  • The fuel for the market is in the $200k to $300k price range – the segment generated 8,104 starts during the past 12 months, making up more than half of the market.
  • As builders continue to seek ways to provide attainable housing, attached home activity is increasing: the number of attached homes under construction has jumped from 368 in 1Q13 to 1,166 in 1Q18. That’s an increase of 353% in five years.
  • Large public-sector builders—who make up more than 1/3 of the Austin market—are able to lock down labor thanks to aggressive spec building that keeps workers busy. For smaller builders, securing qualified trades to build homes is an issue.

Metrostudy’s 1Q18 survey of the Austin housing market shows that despite continuing price escalation, home sales continue to hit new records. The Austin Board of Realtors (ABOR) reported 2,714 single-family home sales in March, the most ever recorded in that month, despite a median single-family home price of $305,233. While Days on Market for all single-family homes increased slightly to 61 days within the Austin MSA, at certain price points and submarkets, homes are selling in less than two weeks. There simply isn’t enough existing home inventory to satisfy demand.

Builders to the rescue! Our survey team recorded 4,064 starts in the first quarter, 17.6% higher than the previous year and 13.1% higher than the previous quarter. In the trailing twelve months ending in 1Q18, builders started 16,457 new homes compared to 15,743 in 1Q17, a 4.5% increase. And buyers are snapping them up. Last year’s gap between annual starts and closings has tightened considerably. During the past two quarters, closings actually outpaced starts. We recorded 4,118 closings in 1Q18, compared to 3,108 one year ago—a 32.5% increase. The annual closings pace increased from 13,634 in 1Q17 to 15,699 this quarter, a 15.1% growth rate. As expected, the closing pace is picking up steam as the spec inventory built in the fall converts.

“Starts and closings continue to be concentrated in submarkets associated with major commuting routes,” said Vaike O’Grady, Regional Director of Metrostudy’s Austin market. “The top three align with Highway 130, but several submarkets served by I-35 and the 183A toll road also make the top ten for quarterly start performance. The gap between starts and closings in every price segment is very tight, with the exception of the $201K-$249K segment, the category that reflects growing townhome activity. Closings slightly outpace starts in several segments, which is indicative of strong demand. As in prior quarters, the fuel for the market is in the $200,000 to $300,000 price range. That segment generated 8,104 single family/townhome/plex starts during the past 12 months, making up more than half of that market.”

As builders continue to seek ways to provide attainable housing, attached home activity is increasing. While the percentage of total annual starts that are attached remains static (around 9% of the total), the number of attached homes under construction has jumped from 368 in 1Q13 to 1,166 in 1Q18. That’s an increase of 353% in five years.

The supply of Vacant Developed Lots increased 3.9% from the previous period last year, but it was not enough to move the needle. Total VDL supply remained at 18.2 MOS, well below the equilibrium target of 20-24 MOS. (Figure 9.) Outside of the City of Austin, the tightest submarkets are Southeast Austin (7.7 MOS), Del Valle (10.9 MOS), Manor (12.2 MOS) and Round Rock West (12.4 MOS). The first three markets are growing, even as Round Rock begins to build out.

Although Austin developers are eager to meet demand while the market is hot, conversations with our clients indicate approval and permitting delays are hampering activity. First quarter deliveries slowed to 4,022, down 24% YOY. And while we just finished a record year, the annual lot delivery pace of 17,538 in 1Q18 is now lower than it’s been since 3Q16.

“Austin continues to ride the wave of buyer demand into the spring selling season, and many builders are reporting record sales,” said O’Grady. “The challenge is on the operations side, where managing increasing construction costs (for both materials and labor) has become critical to builder performance. Developers and builders are not immune to hiring challenges. Large public-sector builders—who make up more than 1/3 of the Austin market—are able to lock down labor thanks to aggressive spec building that keeps workers busy. For smaller builders, securing qualified trades to build homes is an issue. The result: margin pressures and extended build times are affecting a market that is already undersupplied.”

For information contact:
Vaike O’Grady – 512-473-2250
vogrady@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood
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