CENTRAL FLORIDA HOUSING 4Q18: 2018 Ends with a Burst of Strength – Affordability Issues the Main Concern for 2019
- Quarterly new home starts in the Central Florida market were up 27.5% YoY – annual starts were up 18% over 2017 numbers. Quarterly closings are up 22% YoY.
- Homebuilders are finding it difficult to provide homes under $200K. In 2017 this vulnerable segment made up 9.5% of new home closings in Central Florida – in 2018 it only made of 7% of overall closing volume, after declining 24% YOY.
- Our leading indicator, Listed Inventory, is showing that buyers cannot continue to absorb price increases. This pushback is a clear sign that affordability is a chief concern in 2019.
Metrostudy’s 4Q18 survey of the Central Florida housing market – which includes Volusia, Marion, Orange, Osceola, Lake and Polk Counties – shows 6,308 new home starts in the quarter, a 27.5% increase over 4Q17. On an annual basis, Central Florida saw 27,455 starts in 2018, up 18% over 2017 levels.
On a county by county basis, the biggest increase was in Volusia County, where quarterly starts were up 121% YOY. Marion County was up 70% YOY. Osceola County was up 66% YOY. Orange County continued to lead the MSA with 1,422 quarterly starts (Up 18% YOY). However, Osceola is a close second with 1,077 starts. Polk is third with 948 quarterly starts (Up 14% YOY). Annually, the biggest increase was in Marion County, where annual starts were up 66% YOY.
Annual starts in Volusia County were up 45% YOY, followed by Osceola County, which was up 33% YOY. Orange County had the highest annual starts activity with 6,206 – up 7.5% YOY. Osceola County came in second with 4,899 annual starts (Up 33% YOY), and Polk County was third with 4,470 annual starts (Up 23% YOY). Lake County was a distant fourth in the rankings, with 2,496 annual starts. Lake also had the unfortunate distinction of being the only county to have negative growth (Down 13% YOY).
“I’m happy to report that Central Florida’s 4Q18 numbers were very strong, as the market strength of the past year has helped us finish 2018 with a bang,” said Toby Hoff, Regional Director of Metrostudy’s Central Florida market. “Please note that the numbers I’m reporting include all the counties in our Central Florida database. Smaller counties like Alachua or Flagler are not typically included when we’re looking at the MSA. However, I believe it’s important to look at the market area as a whole. Also, the numbers coming out of these counties are not big enough to disrupt the larger trends we’re seeing in the core markets.”
In 4Q18 there were 6,335 quarterly closings in Central Florida, a 22% increase over 4Q17 closing activity. Orange County had the highest closing activity – up 12% YOY. Osceola County comes in second with 1,223 closings – up 74% YOY. Polk County was third with – up 3.8% YOY. In 2018 there were 25,117 annual closings in Central Florida, a 15% increase over 2017. The biggest year over year increases came from Sumter Co – up 94.5% YOY, Flagler County – up 53% YOY, and Seminole County (Up 27% YOY). Orange County had the highest volume (6,261 closings / Up 20% YOY), followed by Osceola County (4,096 closings / Up 8.5% YOY), and Polk County (3,934 closings / Up 18% YOY). Lake County was fourth and the only county to see declines – down 21% YOY.
Strong demand and a supply constrained market have contributed to higher prices, which continues to fuel real concerns about affordability. Homebuilders are finding it difficult to provide homes under $200K. In 2017 this vulnerable segment made up 9.5% of new home closings in Central Florida. In 2018 it only made of 7% of overall closing volume, after declining 24% YOY. Homes in the $200–249K segment have increased 10% YOY, and made up 23% of 2018 closings. The $250-299K segment increased 23% YOY, and made up 27% of 2018 closings. The $300-349K segment increased 23% YOY, and made up 17% of 2018 closings. The $350-399K segment increased 26% YOY, and made up 9% of 2018 closings. The $400-499K segment increased 15% YOY, and made up 10% of 2018 closings. The $500-599K segment increased 58% YOY, and made up 3% of 2018 closings. Homes $600K+ increased 24% YOY, and made up 4% of 2018 closings.
The Regional Realtor Association echoes our concerns on affordability. They report that when compared to 2017, the median home price in 2018 is up 6%, but sales are down 3%. This speaks to the demand for appropriately priced spec homes as the market continues to absorb the increased inventory at a faster pace. Central Florida continues to benefit from strong market fundamentals as we head into 2019. New home demand remains robust, and buyers are leaving core market areas in order to find affordable new homes. Despite big numbers in starts, closings, and lot deliveries, months of supply remains low. What is different from the last two quarters is that our leading indicator, Listed Inventory, is showing that buyers cannot continue to absorb price increases. This pushback is a clear sign the affordability is a chief concern in 2019.
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