SARASOTA / BRADENTON HOUSING 1Q18: New Housing Market Growth Forecast “Stable” Over Next 5 Years; Affordability & Inventory Are Challenges

  • 1Q18 New Home Starts are up 2.3% YoY; Quarterly Closings are down 14.1% YoY
  • Annual Starts are up 2.3% YoY; Annual Closings are up 0.5% YoY.
  • Metrostudy views the Sarasota/Bradenton market as ‘stable’ over the next five years, with potential challenges likely to come from affordability issues: both the cost of the house and the cost to borrower money.

Metrostudy’s 1Q18 survey of the housing market in Sarasota-Bradenton shows that 1,384 single-family units were started in the quarter, an increase of 2.3% compared to 1Q17 and a 11.3% increase from 4Q17. The annual start rate of 5,654 increased by 2.3% compared to last year. Single-family quarterly closings totaled 1,108 units, 14.1% lower than the same quarter last year. The annual closings rate of 5,306 units was 0.5% above the annual closings rate in the same quarter last year. The fourth quarter is typically the biggest quarter for closings and this was true in 2017 with a 14.3% drop from 4Q17 to 1Q18.

“Metrostudy’s forecast for 2018 was for modest 2-8% growth in housing starts and first quarter numbers support that forecast,” said Tony Polito, Regional Director of Metrostudy’s Sarasota/Bradenton market. “Retirees are largely centered in the ‘Baby Boom’ generation, which was between 1946 and 1964. The first ‘Boomers’ turned 65 in 2011, coinciding with the beginning of the housing recovery in Sarasota-Bradenton. To use a sports metaphor, the market looks more like golf than baseball. We have just finished the seventh hole and we have another 11 holes in front of us. Some may prove to be challenging, but we know how many more holes there are left to play. The challenges will likely come from affordability issues: both the cost of the house and the cost to borrower money. Even if retirees are all cash buyers, rising interest rates may very well affect home prices in the north.”

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For the twelve months ending March 31, 2018, new homes starts in price ranges under $300K totaled 2,417 units, down 4.6% from the 1Q2017 annual activity in prices less than $300K. Annual new homes starts in prices over $300K were up 8.2% for the twelve months ending March 31, 2018 versus 1Q 2017. The marginal 127-unit increase in the annual start pace was split: 117 fewer units under $300K and 244 more units above $300K.

In 1Q18, 1,967 lots were delivered to the Sarasota-Bradenton market compared to 1,229 in 1Q last year. Vacant developed lot inventory stands at 37,628 lots, a decrease of 0.9% compared to 37,284 VDL last year. Based upon the annual start rate, this level of lot inventory represents a 79.9-month supply, a decrease of 1.0 months compared to last year. Most VDL are in Charlotte County. At the end of 1Q2018, Manatee County had a 22.9-month supply, down from a 23.5-month supply of VDL in 1Q17. Sarasota County had a 23.6-month supply at 1Q18, up from a 22.2-month supply at 1Q17.

New housing inventory continues show a low supply of finished vacant housing units, which has been dropping since 4Q06. We consider FV equilibrium as between 1.5 and 2.0 months, and as of March 31, 2018, the months of supply of FV units for all of Sarasota/Bradenton stood at 1.1 months, unchanged from 1Q2017. The greater risk lies in under construction inventory, which rose 16.4% to 2,480 units. Homes that are “pre-sold” do not always close. If any of that backlog moves to finished vacant over the next six months, this could be a sign of overbuilding and a cyclical peak. While there is no cause for concern now, keep an eye on the finished vacant count.

“Metrostudy still rates North Port-Sarasota-Bradenton as a low risk market,” said Polito. “Comparing 1Q 2018 closings to 1Q 2017, new home single family prices were up 4.8% in the core counties. Our forecast describes the market as ‘stable’ over the next five years. Some pricing risk could appear if interest rates get upwards of six percent.”

The table below ranks the top ten communities in the market by annual starts:

Community (Area)                         Annual Starts

Lakewood Ranch ……………………………………951

The West Villages …………………………………..694

Palmer Ranch ………………………………………..294

Grand Palm …………………………………………..183

South Gulf Cove …………………………………….162

Del Tierra……………………………………………..139

Punta Gorda Isles …………………………………..139

Milano………………………………………………….130

Rotonda ……………………………………………….116

Willow Walk ………………………………………….107

For information contact:
Tony Polito
813.888.5151
tpolito@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

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; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.