DENVER HOUSING 3Q17: With New Home Prices at All Time Highs – Demand for Townhome Product Surges
- Quarterly New Home Starts are up 6% YoY while annual starts continue to grow – also up 6% from 3Q16 levels.
- The strongest growth has been for townhome and duplex product, up 36% for the year, to 3,020 homes, now representing 26% of the market, the highest on record. Detached single family homes now represent 70% of new home starts – the lowest level since 2009.
- At no time in Denver’s history has housing been as expensive as it is now with only 26% of new home starts priced below $400k – which explains, in part, why townhome product is growing so quickly.
- The average detached new home sales price is now at $536,584 for the trailing 12 months ending in September, 4% higher than a year ago.
Metrostudy’s 3Q17 survey of the Denver area housing market shows that after an unusual decline in starts from the first to second quarter (which has not happened since 2007), builders appear to be back on track as quarterly starts increased 6% over 3Q16 with 3,235 starts. Despite the slowdown in starts from the first to second quarter, annual starts continue to grow, now at 11,493 units, which is a 6% increase over 3Q16 annual starts. Detached homes represent 70% of the home starts in the last year, the lowest since 2009, and have experienced only a 1% increase over the last year to 8,088 homes. The strongest growth has been for townhome and duplex product, up 36% for the year, to 3,020 homes, now representing 26% of the market, the highest on record.
Many builders have been forced to navigate the unexpected and unprecedented Weyerhaeuser floor joist ‘flak jacket’ issue that has delayed completions for the year and pushed back home starts as crews work to remediate the affected inventory. Due largely to the Weyerhaeuser issue, closings in the third quarter also declined 3% from 3Q16, to 2,515 homes. Annual closings in 3Q17 increased 10% to 10,179 units compared to the 9,267 annual home closings in 3Q16. The overall trend for starts and closings remains positive, and expectations are that any slowdown in completions and deliveries will be pushed into the fourth quarter and into 2018 as builders resolve the flak jacket issue and demand remains strong for homes.
“At no time in Denver’s history has housing been as expensive as it is now with only 26% of new home starts priced below $400k,” said John Covert, Regional Director of Metrostudy’s Denver market. “Many prospective entry-level new home buyers are now priced out of the market, and those that can afford to buy have are either moving further out into the periphery, or into more affordably priced attached product, which explains, in part, why townhome product is growing so quickly. The average detached new home sales price is now at $536,584 for the trailing 12 months ending in September, 4% higher than a year ago.”
Builders are on their way toward completing another successful year as starts and closings continue to trend higher. However, all the challenges that the industry faces, which have been well documented, have been temporarily compounded by the Weyerhaeuser floor joist problem that has disrupted starts, completions, and stretched an already thin labor market for many of the builders impacted.
For information contact:
John Covert – 720.493.2020 x 201
About Metrostudy: Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
About Hanley Wood: Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.