SARASOTA / BRADENTON HOUSING 4Q18: Affordability Worries Continue as Production Grows in Higher Price Bands
- Quarterly new home starts are up 5.5% YoY – Annual starts are up 9.8% over 2017 levels.
- 4Q18 was the second best quarter for closings in this decade – up 23.4% from 4Q17
- Every price band over $250k saw increased annual volume with one exception, the $350k to $400k price band. The largest activity gain came in the $400 – $450k price band, a 24.6% annual growth rate.
- Our big concern is the inability to produce product under $250k in this market. Less than 19% of all new home construction is considered “affordable.”
Metrostudy’s 4Q18 lot-by-lot survey of the Sarasota-Bradenton housing market found that 1,310 single-family units were started in the quarter, an increase of 5.5% over 4Q17 levels. However, compared to 3Q18, the quarterly starts pace fell by 24.8%. The annual start rate compared to last year increased by 9.8%, from 5,609 to 6,158 annual starts. Single-family quarterly closings totaled 1,619 units, which was 23.4% higher than the same quarter last year. The annual closings rate was 5,794 units per year, which was 5.3% above the annual closings rate in the same quarter last year. 4Q18 was the second best quarter for closings in this decade.
For the twelve months ending December 31, 2018, new home starts in price ranges under $300k totaled 2,523 units, up 6.5% from the 4Q17 annual. Annual new home starts in prices over $300k were up 12.2% for the twelve months ending December 31, 2018 versus 4Q17. Every price band over $250k saw increased annual volume with one exception, the $350k to $400k price band. The largest activity gain came in the $400 – $450k price band, a 24.6% annual growth rate. The big concern is the inability to produce product under $250k. Less than 19% of all new home construction is considered “affordable.”
The chart below shows the current distribution of annual starts by price range:
“The “Snowbird Season” got off to a slow start in December as contract pace was off substantially compared to December 2017,” said Tony Polito, Regional Director of Metrostudy’s Sarasota/Bradenton region. “The historically poor December for the stock market created some insecurity among potential home buyers, particularly high net worth retirees. That said, traffic levels have been steady, meaning there are more shoppers than buyers. 1954 was the first of eleven consecutive years where the birth rate was over 4,000,000 annually. Those “Boomers” turn 65 this year. Demand should remain strong over the coming decade, but it will be affected by affordability and interest rates.”
During 4Q18, Manatee County had 612 housing starts, down 2.2% from 4Q17 and down 24.1% compared to the 806 units built in 3Q18. During 4Q18, Sarasota County had 575 housing starts, down 4.3% versus the 601 starts in 4Q17 and down 16.8% compared to the 691 units started in 3Q18. Venice is now building 133% of the volume in North Manatee but just 66% of the Southeast Manatee sub-market.
This quarter 1,102 lots were delivered to the Sarasota/Bradenton market compared to 973 in 4Q last year. Vacant developed lot inventory stands at 36,446 lots, a decrease of 1.3% compared to 36,941 VDL last year. Based upon the annual start rate, this level of lot inventory represents a 71.0 month supply, a decrease of 8.0 months compared to last year. Most VDL are in Charlotte County. At the end of 4Q2018, Manatee County had a 20.0-month supply, down from a 22.0-month supply of VDL in 4Q2017. Sarasota County had a 22.4-month supply at 4Q2018, down from a 22.8-month supply at 4Q2017.
For 2018, MLS SF sales were 2.6% higher than the same period of 2017 with 14,334 sales. Prices in December 2018 were 0.8% above the same month in 2017. Because demand is greater than supply, prices are above the long term average, but nowhere near the overvaluation that occurred during the last housing cycle. However, the two highest median prices for calendar 2018 occurred in November, $305k, and December, $300k. The November median home price was the highest since August 2006 level of $308k. Metrostudy’s forecast is for a steady market over the next 24 months with potential bumps in demand, as witnessed in December.
The table below ranks the top ten communities in the market by annual starts, not including condo product.
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