DENVER HOUSING 4Q16: With Prices at Record Highs, the Need for More Affordable Alternatives is Acute
- The Denver market saw 11,038 new home starts in 2016, up 22% from 2015 and the highest level of starts since 2Q07.
- Homes with base prices above $400k now represent 68% of the market, and homes priced above $500k represent 27% – both all-time highs
- With the average detached new home sales price now at $525,486 for the 12 months ending in December, 6% higher than a year ago, the need for more affordable alternatives is more pronounced than ever. Many builders are preparing to introduce new more affordable product lines to accommodate the growing first- time and entry-level buyer segment.
Metrostudy’s 4Q16 survey of the Denver housing market shows that builders followed a strong 2015 with an even more robust 2016. According to our quarterly lot-by-lot field survey, 2,505 homes were started in the fourth quarter, down 16% from the third quarter, and up 9% from 4Q15. These start figures account for all product types including single family detached, townhomes, duplexes and condominiums. There were 11,038 annual starts in 2016, up 22% from 2015 and the highest level of starts since 2Q07.
“Home starts for 2016 were slightly above the 10,600-10,800 figure forecasted by Metrostudy as demand remains strong and more diverse product begins to materialize,” said John Covert, Director of Metrostudy’s Denver region. “One example is the launch of East-West Partner’s condo project, the ‘Coloradan’ which is next to Downtown Denver’s Union Station and consists of 342 units. This is by far the largest new condo project this market has seen in the last 10 years.”
With persistent tight trade labor plaguing the industry during this recovery, deliveries remain somewhat irregular from quarter to quarter though the overall trend continues to grow. Builders closed 2,464 homes in the fourth quarter, up 14% compared to 4Q15. Annual closings in 4Q16 increased to 9,253 units, up 18% compared to 2015.
Homes with base prices above $400,000 now represent 68% of the market, and homes priced above $500,000 represent 27% – both all-time highs fueled by steady demand from move-up buyers coupled with the rising land, development, materials costs. The remaining 32% of home starts below $400,000 is down sharply from a year ago leaving entry-level and first-time buyers an even shallower pool of buying options. Many builders have or are planning to introduce smaller more affordable product, including townhomes, to meet entry-level buyer demand that is likely to increase in the years ahead. With the average detached new home sales price now at $525,486 for the trailing 12 months ending in December, 6% higher than a year ago the need for more affordable alternatives is more pronounced than ever.
“2016 was another good year for homebuilders and the industry in Denver,” said Covert. “However, as costs increase and purchasing power erodes with continued mortgage rate hikes, Metrostudy believes 2017 will look a little different than last year. Many builders are preparing to introduce new more affordable product lines to accommodate the growing first- time and entry-level buyer segment. Smaller homes on smaller lots with design elements that appeal to these potential buyers will available in many new communities throughout Denver . Builders will start more homes in 2017, but the pace of growth for average home size and average sales prices experienced the last several years will likely start to plateau.”
For information contact:
John Covert – 720.493.2020 x 201
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
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