DENVER HOUSING 4Q17: Record Market Strength Driving Buyers into Townhome and Duplex Product – 2018 Looks to be More of the Same
- Annual New Home Starts were up 8% from 2016, while quarterly starts were up 18% YoY.
- Prices are at Record Highs with only 24% of New Home Starts priced below $400k
- Detached homes represent 68% of the starts in the last year, the lowest level since 2009, and have experienced only a 2% increase over the last year to 8,216 homes. The strongest growth has been for townhome and duplex product, up 25% for the year, now representing 25% of the market.
- Persistent low levels of resale listings should drive more prospective buyers to builder sales centers. Metrostudy expects 2018 to be another strong year for new home sales, despite having to navigate many of the same challenges that plagued the industry last year.
2017 was another strong year for builders, as Denver’s economy and housing demand remain strong. The market is estimated to remain underbuilt, relative to demand, for several more years given the severity of persistent constraints facing the industry, which should provide builders the opportunity to grow at a measured pace. Metrostudy’s 4Q17 survey of the Denver market shows that builders started 3,003 homes in the fourth quarter, an increase of 18% over 4Q16. This increase was expected due to a combination of factors, including mild weather and the slow resolution of the Weyerhaeuser floor joist ‘flak-jacket’ issue that delayed completions in the 2nd half of the year and pushed back home starts as crews worked to remediate the affected inventory.
Annual starts continue to grow, now at 11,958 units, which is an 8% increase over 2016 annual starts. Detached homes represent 68% of the home starts in the last year, the lowest since 2009, and have experienced only a 2% increase over the last year to 8,216 homes. The strongest growth has been for townhome and duplex product, up 25% for the year, to 2,946 homes, now representing 25% of the market. Due largely to the Weyerhaeuser issue, closings in the third and fourth quarters have declined, down 5% in the fourth quarter to 2,392 homes. Annual closings in 4Q17 were still up for the year, increasing 5% to 10,076 units, compared to the 9,642 home closings in 2016.
“Housing affordability continues to be a major concern for the industry, prospective buyers, and government and economic development officials,” said John Covert, Regional Director of Metrostudy’s Denver market. “At no time in Denver’s history has housing been as expensive as it is now with only 24% of new home starts priced below $400,000. The price bands with the largest year-over-year gains are the $500,000-$599,999 segment with a 41% increase, and the $600,000-$699,999 segment with a 62% increase. These two segments combined account for 30% of all homes built in the metro area and demonstrate the continued strength of the market in general. The average detached new home sales price is now at $541,480 for the trailing 12 months ending in December, 4% higher than a year ago.”
Builders continue to face labor shortage challenges, which has delayed completions and pushed months of under construction inventory, and total inventory, higher. However, builders in Denver will still experience strong demand for homes. One driver will be the persistent low levels of resale listings in the market that should drive more prospective buyers to builder sales centers. Metrostudy expects 2018 to be another strong year for new home sales, despite having to navigate many of the same challenges that plagued the industry last year.
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 www.hanleywood.com.