CENTRAL FLORIDA HOUSING 2Q18: Solid Job Growth Continues to Support Strong Housing Demand; Declining Affordability Sign of Potential Slowdown
- Quarterly New Home Starts are up 7.1% YoY; Annual Starts are up 11.9% from 2Q17.
- Quarterly Closings are up 9.9% YoY; Annual Closings are up 6.8% YoY
- Housing affordability in Central Florida is rapidly diminishing as prices continue pushing skyward; the relatively slow pace of new lot development is limiting new home supply and supporting the ongoing uptick in prices.
Metrostudy’s 2Q18 survey of the housing market in Central Florida shows that 6,920 units were started in the quarter, up 7.1% compared to 2Q17. The annual starts rate of 25,470 units has increased by 11.9% over the past year. Quarterly closings totaled 6,229 units, 9.9% higher than the same quarter last year. The annual closings rate of 23,121 units is 6.8% above the rate recorded a year ago.
“The rise in Central Florida’s new home starts is indicative of the strong backlog many builders brought into 2018 and is a good sign for the market,” said Toby Hoff, Regional Director of Metrostudy’s Central Florida market. “With job growth trending up, homebuilding is humming along in Lake County, most notably in the Fruitland Park area. Absorption levels continue to rise in Central Florida despite the declining supply of home listings, which are down to near record lows. This is a testament to the region’s strong job market. Additional demand for houses continues to come from investors, seasonal residents and international buyers. In addition, homeownership has been elevated by accelerating rents, part of the reason millennials are buying more homes than they did in the recent past.”
Annual closings were strongest in the $250K to $299K range, accounting for 25.7% of all closings over the past year. Rounding out the top three was the $300K to $399K segment, comprising 25.3% of new home closings for the year, followed by the $200K to $249K segment, comprising 23.9% of new home closings.
Total inventory, which is comprised of units under construction, finished vacant units and models, equaled 15,649 units at the end of 2Q18, well above the 13,300 seen in the second quarter of 2017. Overall, total housing inventory has increased during the past two years, due primarily to an increase in units under construction. Under construction inventory increased to 9,820 units in 2Q18, up 1,847 units from one year ago. Finished vacant inventory stood at 4,899 units in the second quarter, with 2.5 months of supply. The supply of finished vacant inventory has hovered between 2.4 and 2.8 months since 2Q15. In Central Florida, vacant developed lot inventory is highest in Saint Cloud, at 79,593 lots, followed by Orlando at 67,550 lots, and Kissimmee at 59,896 lots.
In 2Q18, Central Florida had 6,934 lot deliveries, a 31.5% increase from the 5,274 lots delivered a year ago. Based on the quarterly starts rate, this lot inventory represents 25.7 months of supply, down slightly from the 27.7 months a year prior. Lot inventory levels have been steadily falling each quarter since hitting 42.3 months of supply in the first quarter of 2015.
“Demand for new housing remains strong, however, signs of a slowdown are visible,” said Hoff. “Housing affordability in Central Florida is rapidly diminishing as prices continue pushing skyward. With wages falling further behind the rate of home price appreciation, competition has revved up for condos and townhouses. However, the relatively slow pace of new lot development in Central Florida is limiting new home supply and supporting the ongoing uptick in prices. Low inventory levels in many local areas’ new and resale housing markets could spur demand in the short term as potential buyers rush to act before mortgage interest rates rise significantly. Solid employment growth will continue to support housing demand over the coming year.”
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