ST. GEORGE / MESQUITE HOUSING 4Q18: Significant Growth Continues as Affordability Pressures Force Production into Attached Housing
- Annual New Home Starts in are up 42% over 2017 levels – Quarterly starts are up 57% YoY.
- Annual New Home Closings are up 28% YoY – Quarterly closings are up 42% from 4Q17 levels.
- As costs for housing continue to increase, attached homes are becoming much more accepted as homebuyers look for a less expensive option. The nightly rental market has also been a large contributor to the increase in attached housing.
- While the St. George market has traditionally been known as a more reasonably priced market, affordability is becoming more of an issue, especially for the local working class home buyers. Currently, only 24% of all new home starts are below $300,000, compared to 36% in 2017.
Since 2012, new home starts in the St. George market area have increased an average of 39% year over year. While some years have been a little slower than some, the market has experienced significant growth throughout this cycle. According to Metrostudy’s 4Q18 lot by lot survey of every subdivision, the St. George market started 708 new homes during the fourth quarter, which is a 57% increase over 4Q17, and up 27% from last quarter. New home closings for the quarter increased 42% compared to 4Q17 and.5% above last quarterly for a total of 574. Annual new home starts during 2018 totaled 2,651, which is 42% higher than 2017. Annual new home closings for the year reached 2,248, a 28% increase over 2017.
The gap between starts and closings does appear to be slightly widening, however remains healthy at 15%. Annual starts for single-family detached homes reached 2,026 for 2017, a 26% increase over 2017. Annual closings increased 22% compared to last year for a total of 1,890. Annual starts for attached homes/units increased 148% compared to last year to 625, and closings increased 77% for a total of 358. Annual starts in the Mesquite market area totaled 403, a 22% increase compared to 2017. Annual closings reached 356, a 27% increase compared to last year. As costs for housing continue to increase, attached homes are becoming much more accepted as homebuyers look for a less expensive option. The nightly rental market has also been a large contributor to the increase in attached housing.
“While the St. George market has traditionally been known as a more reasonably priced market, affordability is becoming more of an issue, especially for the local working class home buyers,” said Eric Allen, Regional Director of Metrostudy’s Utah / Idaho market. “Currently, only 24% of all new home starts are below $300,000, compared to 36% in 2017. In order for the market to continue growing at a similar pace, builders will need to find ways to deliver more product in the lower price segments. However, with increased city regulations, material prices and labor costs, this will be a difficult but necessary task. Currently, the median price for a new detached home in the St. George market is $382,100, which has increased 7% from last year and 2% above last quarter. The median price for a new attached home/unit increased 32% compared to 2017 and is up 6% from last quarter to $313,600. The median new home price in Mesquite is currently $293,900 which is up 8% from last year and 3% above last quarter.”
The St. George market continues to experience steady economic job growth and 2018 was no exception. According to the Bureau of Labor Statistics (BLS) the St. George CBSA created 3,200 new jobs during 2018, this is up from the 3,000 jobs created in 2017. In-migration continues to fuel much of the local job growth as many find the St. George market to be a great place to relocate and raise a family. Total employment has increased 4.9% over the past year to 68,000, which is slightly above the 4.8% growth at this time last year. Job growth is projected to remain steady for the next few years as more companies look to expand their operations in the market.
The St. George market is running at near record levels, and while we expect the market to remain strong through 2019, there are some potential headwinds that may arise throughout the year on a national or global level. Pay close attention to inventory levels and costs as homebuyers may be expecting more deal negotiation.
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