RENO HOUSING 1Q17: A Builder’s Market – Receding Resale Inventory promotes new Home Building in 2017
- Annual new home starts through 1Q17 are down 3.7% from 1Q16, attributed to a wetter than normal winter. Annual closings are up 12% from last year.
- Production continues to push into the higher price points, as last year, 36% of all new home starts were under 300K, while this year only 15% were
- This year we’re forecasting a 10% increase over last year. However, new home growth may continue to be hindered by lack of lot supply and affordability pressure
Metrostudy’s 1Q17 survey of the Reno housing market shows decreased inventory is driving up prices and incentivizing new building projects. Both resale and new home inventory continue to recede, causing a steady but slow increase in home building.
“Prices continue to rise, with fewer, bank-owned and short sales dominating the market,” said Greg Gross, Director of Metrostudy’s Reno market. “With new home inventory receding significantly, builders are feeling more confident to start new homes, but remain cautious about over speculating.”
Annual new home starts through 1Q17 were 1,871, down 3.7% from 1Q16. “We don’t believe this is an indicator,” said Gross, “but a result of a wetter than normal winter. Annual starts are an indicator of future new home closings and they are up to 1,953, a 12% increase from last year.” First quarter new home starts are down 31%, most likely due to labor constraints, winter weather and shrinking supply.
Average “offer to build” base prices have increased for new homes in active projects. Metrostudy reports them at 421K, representing an increase of only 2.5% from a year ago, yet average prices have since increased by 5%, essentially doubling in the last quarter of 2016. In general, affordability remains a concern in home prices and starts have continued to shrink below 300K. Start activity has shifted over last year into price ranges over 300K, as builders try to provide lower priced homes in an effort to offset land and construction costs. Last year, 36% of all new home starts were under 300K, while this year only 15% were.
Supply remains tight in Reno. The supply of Finished Vacant Single Family homes is among the lowest level since Metrostudy began tracking the Reno market in 2006. Lot inventory also remains very low in Reno. There are currently only 1,963 lots being developed. Metrostudy reports only 4,714 Finished and Vacant single-family lots, which equates to 32 months of supply based on current pace. Only 19% of the 168-month supply of Reno had 3 years ago.
“Overall, 2017 is expected to be a strong year, exceeding 2016, which proved to be stronger than 2015 across all indicators,” said Gross.” Metrostudy forecasted 1900 new home starts in 2016, and there were actually 2004, 5% more. With Nevada on the top relocation destination list, Metrostudy is bullish on steady growth throughout the state in 2017. Builder confidence in the market continues, with an eye on a tighter labor supply and increased construction costs. This year we’re forecasting a 10% increase over last year. However, newer home growth may continue to be hindered by lack of lot supply and affordability pressure.”
Greg Gross @ 916.231.9370
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
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