The US housing market can no longer be painted with one brush, as the housing recovery is playing out very differently across the country. Here are some anecdotes gleaned from our consulting team:
Florida on sale to the world.
Investors, investors, and investors. From Russia to China to the UK to Brazil, Florida is attracting real estate investors from all over the world. Domestically, the institutional single-family renters are competing with local flippers, too. Good finished lots are now at peak prices in several markets. The active adult/retiree markets continue to experience strong growth.
North Carolina slows after surge.
After a strong Spring housing surge, growing builder competition and a lack of fundamental economic growth are tempering local housing market recoveries. Dwindling lot supplies have also put pressure on builders to get ahead of the pipeline and self-develop communities to maintain volumes.
DC moving South and West.
New home sales have remained fairly steady since the March 1 start of sequestration. The sequestration impact has been less than expected with buyers still purchasing homes but choosing smaller units or spending less on options and upgrades. Entry-level builders in particular are working closely with buyers who think they may be impacted by budget cuts. Land inventories in the Washington, DC metro area are limited, and the market is expanding southward and westward.
Texas economy is growing big!
Entry-level buyers are struggling more here than other places, but that is always the case in Texas. The strongest economies in the country just seem to keep getting stronger, with a notable increase in license plates from other states. The continued economic growth and relocation demand has pushed land, lot and home prices to all-time highs. Apartment construction is booming. Houston is now the largest housing market in the country. In Austin, finished lots in A markets such as Cedar Park and west Austin are becoming more challenging to find, and residential development is migrating northward and westward into regions that had historically been considered B sub-markets.
Midwest coming back to life.
Once the Midwest thawed out in April, the housing market thawed out as well. Job growth continues to improve, as do sale volumes. Pricing improvement is right around the corner. Builders in both Minneapolis and Chicago are now running out of desirable lots and are seeking viable development opportunities.
Phoenix temperature cooling.
The white-hot land market in Phoenix may be cooling off. Home-builders in the A markets are pausing to carefully consider land prices, after 12 months of rapidly escalating prices. Builders are still pursuing deals but are mindful of the impact of rising mortgage rates and price increases on price sensitive buyers. With temperatures over 100 degrees, it is tough to ascertain true demand in Phoenix right now.
Vegas showing some rate sensitivity.
With most of the land around Vegas owned by the government, Las Vegas land supplies remain limited, and builders continue to search for finished lots. Prices for land continue to rise with public home-builders dominating the Las Vegas market and aggressively bidding on residential land. In the last few weeks, we are starting to see a little pullback with rising cancellations.
Georgia joins the recovery.
The Atlanta housing recovery has officially begun this year, as soaring demand continues in the popular Golden Triangle of North Atlanta. Supply constraints in the north are driving up lot values, especially as the market begins to shift from distressed lot transactions in exurban sprawls to new development within core A and B sub-markets. Foreclosure buyers have been big contributors to the recovery.
Northern California in sticker shock.
New home prices may have risen too much in the Bay Area, where consumers have pulled back due to sticker shock. While sales are still strong and price increases still common, rising mortgage rates and the remarkable appreciation of the last year-plus has left many potential buyers behind. Though the most desirable new home communities can simply move down their interest list with each new release, a general slowdown in appreciation is inevitable.
Riverside is again driven by coastal pricing.
Rapidly rising prices in Coastal Southern California markets are pushing more buyers back into the more affordable inland markets of Riverside and San Bernardino Counties, where sales are surging. Sales rates of 6 to 8 sales per project per month are common in A markets like Corona and Eastvale. Land prices are skyrocketing in the close-in markets, rising over 25% in just the last six months.
Orange County supply is rising.
The birthplace of large-scale small-lot master-plans is exploding, with a plethora of new home communities recently opening. Sales are strong and driven by a significant number of foreign buyers who are moving in.
Seattle expands outward.
Home-building is pushing out of King County. New home and lot prices in South Snohomish have soared over the last 12 months, and home-builders are showing an increased appetite for land south of Seattle in Pierce County. As evidence, consider that Tehaleh in Bonney Lake, by Newland Communities, is now the best-selling master-plan in the metro area.
This is a big country with a lot of opportunity!