AUSTIN HOUSING 4Q17: Builders Report Record Sales in 2017; Robust Market Expected in 1H18

  • Decade-High Starts Pace Continues: Annual Starts Over 16,000 For First Time Since 2006.
  • In 4Q17, the number of starts below $200,000 continued to shrink: the 915 starts in that category is roughly half what it was just two years ago.
  • The number of Finished Vacant homes jumped 49% YoY to 2,920 units. Even given the strong starts pace, that level of finished inventory is higher than it has been since the winter of 2015-2016
  • Total inventory at highest level in a decade – more than 10,000 homes for the first time since 2006.

Metrostudy’s 4Q17 survey of the Austin housing market shows that builders started 16,058 in 2017, up 2.7% YoY. The annual closings pace was 14,690 this quarter, up 6.5% from 4Q16.  Our survey team recorded 3,456 starts in the fourth quarter, 4% lower than the previous quarter and a 16.8% decrease YoY. There were 3,761 closings in 4Q17, a 12.7% increase from 4Q16.

“For now, strong demand continues and 2017 ended on a high note, with over $1 billion in home sales,” said Vaike O’Grady, Regional Director of Metrostudy’s Austin market. “Many of our builder members reported record sales in 2017; we estimate nearly 20,000 new homes were sold in the Austin area last year. The last, and only, time we finished a year above 16,000 starts was 2006. Many 2017 starts were the result of builder investment in spec inventory. However, the start pace is slowing, at least temporarily, and the gap between starts and closings appears to be tightening slightly. For the first time all year, quarterly closings in 4Q17 outpaced starts.”

Three separate geographic areas led the pack for annual starts in 2017: Pflugerville (1,601), Cedar Park/Leander West (1,458), and Kyle/Buda (1,432). Manor made its debut in the top five with 1,104 starts, and Liberty Hill and Hutto achieved 962 and 953 annual starts, respectively. Round Rock also resurged in 2017 with 614 annual starts.

In 4Q17, the number of starts below $200,000 continued to shrink: the 915 starts in that category is roughly half what it was just two years ago. As in prior quarters, the fuel for the market is in the $200,000 to $300,000 price range. That segment generated 7,882 starts during the past 12 months, making up nearly half of the market. The starts and closings paces for homes with base prices from $300,000 to $499,000 aligns closely, indicating that demand and supply appear generally to be in line.

The total number of homes in inventory (models, under construction and finished vacant) at the end of 2017 totaled 10,729 units. Before 2017, the last time Austin had more than 10,000 homes in inventory was 2006. Total housing inventory in 4Q17 stood at 8.8 Months of Supply (MOS), a fairly high level given where we could be in the cycle. The number of Finished Vacant homes jumped 49% YoY to 2,920 units. Even given the strong starts pace, that level of finished inventory represents 2.4 MOS, higher than it has been since the winter of 2015-2016. Finished Vacant now makes up approximately 27% of the Total. At the same time, the supply of Vacant Developed Lots totaled 25,254 in 4Q17, an increase of 13.3% YOY. As of December, this represents 18.9 MOS, still well below the 22-24 MOS considered equilibrium. Lot supply for lots smaller than 59’ wide is very tight however, and no segment has more than 15.5 MOS.

“Recent reports indicate that we are in for strong start to the year,” said O’Grady. “Buyers seem willing to select secondary and even tertiary markets in order to qualify. Areas like Del Valle and Manor are poised for record years. Low mortgage rates continue to be our friend, at least for the time being. Challenges exist as high home prices continue to keep would-be buyers on the sidelines and increased labor and construction costs, combined with tighter regulation and higher fees, put pressure on builder margins. Yet Austin’s economy continues to chug along. Some economists project 30,000 jobs will be added in 2018. Absent a significant geopolitical threat—or substantial inflation— Austin is poised for a robust housing market in the first half of 2018.”

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

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