TAMPA HOUSING MARKET 3Q18: Truly Affordable Housing Becomes an Impossibility in this Market; Starts Slow in the Higher Price Bands
- Quarterly New Home Starts are up 5.3% YoY – Annual Starts are up 6.8%
- New Home Activity is continuing to shift to higher price points as starts under $250k are down 8.9% from 3Q17 levels.
- A telltale sign of a slowing market is contraction starting in the upper end, and while last quarter we noted a decline in the annual start pace for units over $450k, that trend continued into 3Q18 with a 6.8% decline in starts in that highest price band.
Metrostudy’s 3Q18 survey of the Tampa housing market shows that 2,946 single-family units were started in the quarter, an increase of 5.1% compared to 3Q17. The annual starts rate, compared to last year, increased by 6.8%, to 11,026 annual starts. Single-family quarterly closings totaled 2,772 units, 22.4% higher than the Irma affected 2,265 closings during the 3rd Quarter of last year. The annual closings rate was 11,111 units, 15.0% above the annual closings rate as of 3Q17. Single-family quarterly closings totaled 2,772 units, which was 22.4% higher than the Irma affected 2,265 closings during the 3rd Quarter of last year. The annual closings rate was 11,111 units. This was 15.0% above the annual closings rate of 9,664 units as of 3Q17.
For the twelve months ending September 2018, annual new home starts in price ranges under $250k totaled 4,402 units, down 8.9% from the 3Q17 annual activity. New home starts in prices over $250k grew by 20.6% from 5,495 units as of 3Q17 to 6,624 units as of 2Q18.
The table below indicates the current distribution of annual starts by price range:
“Hurricane Irma affected both starts and closings during 3Q17 – and the 5.1% increase in quarterly starts this year is less than losing one week of activity last year (7.7% of the quarter was lost), so a case can be made that the market was slower in 3Q18 than 3Q17,” said Tony Polito, Regional Director of Metrostudy’s Tampa market. “A telltale sign of a slowing market is contraction starting in the upper end, and while last quarter we noted a decline in the annual start pace for units over $450k, that trend continued into 3Q with a 6.8% decline in starts in that highest price band. We are already undersupplied on the lower end product as land, lot and labor costs coupled with government fees make it nearly impossible to build truly affordable housing. This situation is made worse by rising interest rates. The national 30 year mortgage has now crossed 5% which magnifies the need for affordable product.”
Because we pushed some 2017 closings into 2018 due to Irma and we had no real lost time to weather this year, the annual closing pace is above 11,000 units for the first time since 3Q 2007. Metrostudy’s theory is 30,000 new jobs equals 11,000 new “for sale” housing units. If Tampa can sustain this level of job growth, the biggest road block for new housing will be the cost of housing versus wage growth, especially with another three to four Federal Reserve interest rate increases anticipated in 2019.
The table below ranks the top ten communities in the market by annual starts:
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