Metrostudy has just completed its latest study, covering homebuilder projects all around the nation. The research company’s team of 400 researchers drives more than 200,000 miles per quarter visiting and collecting data through direct counts. Within Metrostudy’s national footprint, housing starts rose 2.5% between the fourth quarter of 2013 and the fourth quarter of 2014. This was a very uninspiring “top line” number, but beneath that number there is a great deal of regional variation, with some areas going up and others going down. In broad strokes, the western U.S. saw a decline, the eastern seaboard was flat, and the Texas markets showed increases across the board.
Although “The West” showed a decline overall, that mostly reflected Phoenix (down 16.6%), Salt Lake City (down 11.9%), as well as Boise (down 16.3%) and Tucson (down 8.1%). California was a mixed bag, with gains in the Los Angeles area, and declines in the Bay Area.
As some specific examples from the new study, consider these trends, covering exclusively detached single-family housing (percent changes are from 4Q13-4Q14):
There was a wide divergence of results in the west:
· Denver up 14.9%
· Northern Colorado up 10.7%
· Bay Area down 8.5%
· Sacramento down 2.4%
· Inland Empire up 4.5%
· LA County up 48.1%
· Orange County up 12.8%
· San Diego County down 20.2%
Florida showed a mix of results as well:
· Naples/Ft Myers up 29.0%
· Tampa fell 12.8%
· Treasure Coast up 6.1%
In the east and south:
· Atlanta up 16.3%
· Charlotte flat
· Nashville up 6.9%
· Suburban Maryland down 14.5%
· Northern Virginia down 3.9%
And Texas:
· Dallas-Fort Worth up 15.2%
· Houston up 8.8%
· San Antonio up 9.9%
· Austin 13.7%
Chicago single-family starts were up 16.5%, but this spurt is not expected to continue this year, and Indianapolis and Twin Cities were both down.
The good news is that job growth is picking up across markets that Metrostudy tracks, and this should translate into the release of more “pent-up demand” this year. We do not expect a large increase in housing starts this year, but it should be better than 2014. There are positive forces (“boosters”) as well as forces that tend to slow demand growth (“obstacles”) at play.
Boosters for Housing This Year:
1. Loan guidelines eased
2. Job growth likely to continue to rise
3. Depressed household formation rate expected to rise
4. Rents are reaching the pain-point
5. Mortgage rates have become even more favorable
Obstacles for Housing This Year:
1. Mortgages are still difficult to obtain
2. Millennials are still renting
3. Global economic slowdown
4. Debt-to-Income ratios are still a problem
5. Land prices have encourages builders to focus mostly on the move-up market