Raleigh-Durham Housing 4Q15: Triangle New Home Market Demand Is Strongest In Years

  • 4Q15 Strongest Quarterly Closings since 3Q08 – up 23% YoY; New Home Starts up 16.6% from 4Q14.
  • Homes priced between $200K-$350K continued to lead the market in production growth and now represent 55% of the total market; inventory continues to shrink in the $150K-$199K price range, leaving buyers with fewer lower-priced new home options.
  • The Townhome market strengthened: quarterly starts up 37% and closings up 49% YoY, and townhome lot deliveries increased 24% YoY, still less than 80% of the rate of starts.

FEBRUARY 2016 -Metrostudy’s 4Q15 survey of the Triangle housing market shows that on 2,228 new homes were started, up 16.6% from 4Q14. Annual starts surveyed through the end of 4Q15 numbered 9,845, 14.6% higher than the 8,594 homes started in the same period a year ago. Quarterly closings – previously unoccupied new homes that now are occupied – totaled 2,510 units, a 22.6% increase from 4Q14 and the single largest quarterly closing figure since 2,932 in 3Q08. Annual closings numbered 9,244 in 4Q15, 7.5% more than the 8,600 annual closings as of 4Q14.

“Despite challenging weather during the fall season, for construction activities, the Triangle housing market finished 2015 on a strong note with closings posting the largest fourth quarter result since 2008,” said Jay Colvin, Director of Metrostudy’s Raleigh-Durham Triangle region. “This was driven by the largest number of new homes finishing construction in a calendar year since 2008. While labor pools are still tight and growing staffs continues to be a challenge, the market has made due.”

Homes priced between $200,000 and $350,000 continue to lead the market in terms of production growth. This segment added 1,033 more homes to its total of new starts in 2015. This broad range of product now represents 55% of the total market. Price sensitive buyers continue to have a harder time finding new home options as the $150K-$199K price range has housing inventory of 6.4-months’ supply, and only a 17.8-months’ supply of lot inventory, which is the lowest total supply number among any price segment in the Triangle. The $200K-$250K market isn’t far behind in terms of shortages, with the lowest housing supply of 6.1-month’s supply, and only 18.5-months’ supply of lots.

Total inventory – models, finished vacant unoccupied new homes, and new homes under construction – equaled 5,410 units in 4Q15, 12.5% greater than the 4,809 units observed in 4Q14. Under Construction inventory now stands at 3,570 homes (4.6-months’ supply), which is 23.5% greater than the 2,891 homes under construction in 4Q14. Finished Vacant inventory now stands at 1,554 homes, which is 7.9% fewer than the units observed in 4Q14. Finished Months’ supply has also decreased to 2 months’ from 2.4 months’ a year ago. At current closing pace Total Inventory represents a 7-months’ supply of homes.

The 18,186 vacant developed lots in the Triangle in 4Q15 represented a decrease of 1,039 lots from the 19,225 lots surveyed in 4Q14. At the current absorption rate, these lots represent a 22.2- months’ supply. Metrostudy considers 18-24 months to be normal, as on average that is the amount of time it takes to entitle and deliver new home lots to the market. In some submarkets, lots supplies are significantly under the 18-month mark, while in others the months-of-supply of lots remains above the 24-month mark. Lot deliveries have been growing consistently, but took a step backwards in the fourth quarter. 1,995 new lots were delivered for home construction, 3.4% fewer than were delivered in 4Q14. Over the past four quarters Triangle developers delivered 8,806 new lots, up nearly 23% versus a year ago, but only 90% of the rate of new home starts for the year. The pipeline of lots under development has grown, but delivery rates have remained muted.

Triangle townhome builders started construction on 562 townhomes (THs) in 4Q15, 37% more than the number of THs started in 4Q14. In 4Q15, 551 THs closed, a 49% increase from 4Q14. Annual closings of 2,003 homes were 17% greater than the 1,714 units closed in the four quarters ending in 4Q14. Annual starts of 2,089 homes were 18.4% greater than the 1,765 observed in 4Q14. Triangle townhome inventory of 1,039 units in 4Q15 represents a 6.2-months’ supply. In 4Q15, 793 THs were under construction, a 23.3% jump from 4Q14 when 643 units were under construction. Current under construction inventory represents 4.8 months-of-supply. In 4Q15, 194 finished vacant THs were surveyed, which is a 29% decrease from the 4Q14 survey. These units represent 1.2 months of supply. The 2,421 vacant developed lots available for TH product in 4Q15 represent 13.9 months of supply, a decrease from the 4Q14 figure of 2,864. Over the previous four quarters 1,646 townhome lots were delivered to the market. While this was a 24% increase from last year, it is still less than 80% of the rate of starts.

“One thing that does not look to change in 2016 is overall tight inventory. The lack of availability of newly developed lots in the highest demand submarkets is a huge impediment to continued growth,” said Colvin. “The number of lots developed in 2015 was 23% higher than 2014, but the lots came on line in fits and starts. Overall the market again failed to deliver enough lots to meet current demand. This situation is manageable in the short term, especially as many of the larger builders have near and mid-term positions secure. But long term it will continue to be the single greatest factor in determining market longevity, and whether or not these dislocations between supply and demand lead to unsustainable pricing growth. Builders have been actively seeking ways to diversify away from concentrations in the move-up and luxury market, and some exploration in to exterior markets with mixed results are taking place. In general the positives are outweighing the negatives, exactly what is hoped for in hedge bets. The trend is expected to continue and market participants should continue to see overall strong demand in the year ahead.”

For information contact
Jay Colvin
919- 314-0420
jcolvin@metrostudy.com

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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