PORTLAND HOUSING 4Q17: The Market Slows at the End of 2017; Widening Spread between New and Resale Housing Pushes Share of New Construction to New Lows

  • Metrostudy’s 4Q17 survey of the Portland housing market shows that new home starts are down 6% YoY for the fourth quarter, a decline which was needed to keep the region from getting oversupplied with spec inventory
  • Rising prices are pushing the number of possible buyers down: only about 26% of the population can afford a home over $450k
  • The spread between resale and new construction continues to widen. The new construction market makes up 10% of all homes purchases in Portland Metro, and if pricing is not controlled moving into 2018 and 2019 that market share for new construction could drop to 8%.

Metrostudy’s 4Q17 survey of the Portland housing market shows that new home starts are down 6% year over year for the fourth quarter, a decline which was needed to keep the region from getting oversupplied with spec inventory. Multnomah county shows a high supply based on months of supply but it really comes down to a few builders that are holding that inventory. My hope is as the spring buying season hits at least half of the 70 homes will be bought up. The rest of the counties are fine on spec inventory levels between 3 and 4.5 months supply.

“The attached market did not do as well as expected in 2017 with the exception of a couple builders. It comes down to product and marketing,” said Todd Britsch, Regional Director of Metrostudy’s Portland office. “There is a huge demand for attached housing in the region but 80% or more of the projects have no website, no staff on site. A buyer is challenged to find any digital information regarding the projects or product. Most developers are not doing presales and in an environment of declining sales, presales are critical.”

Detached sales fell 5% from 2016 and the fourth quarter brought in the 7th consecutive quarter of declining sales volume. Outpricing the mortgage market is the primary cause. When we start looking the list prices of available inventory for new construction Clark Counties median detached list price is up 11% for the fourth quarter year over year which is high but not compared to the 18% jump Clark took in the 3rd quarter year over year.

Understanding that the cost of labor and materials continue to rise it is important to also understand that there are a limited number of buyers that can afford a home over $450,000. It’s estimated that about 26% of the population make the $125,000 needed.

Just when we had a glimmer of hope that we would bring more lots to market than homes sold plat recordings tapered off. Based on the trailing 12 months of sales we have a 14 month supply of vacant lots on the market today and a 4 month supply of unsold spec Inventory which means the market is neither over or under supplied.

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The spread between resale and new construction continues to widen. In 2012 the cost of a resale home was $235,700 while the cost of a new construction home was $278,700 –  an 18% spread. This is a historical average. The cost of a new home should be between 15% and 19% more expensive. In 2016 that spread hit 30% as the region ran low on resale inventory. In 2017 that resale inventory began to rise again but the spread only fell to 28%. The new construction market makes up 10% of all homes purchases in Portland Metro. If pricing is not controlled moving into 2018 and 2019 that market share for new construction could drop to 8%.

For information contact
Todd Britsch – tbritsch@metrostudy.com
Tel: 425-953-4714

About Metrostudy:  Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

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