News & Opinions
The latest news and insights from Hanley Wood’s outspoken experts and key thought-leaders throughout the residential and commercial design and construction industry.
Crucial Northern CA Housing Market Continues to Grow… But Slowing
Metrostudy News / November 12, 2013
2013 marches on with continued optimism, albeit perhaps slightly more cautiously so than in quarters past, according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.
Northern California Annual Housing starts are UP 62% from 3Q12, while closings are UP 45%. Quarterly new home closings are UP 27% from 3Q12. The annual start pace is at the highest level since 2Q08 and the annual closing rate is nearly as high as 3Q10. Closings have been outpacing starts for more than four years now. As a result, inventory levels fell below equilibrium. The increased start pace over the past year will help stabilize equilibrium.
Finished inventory of housing has been steadily decreasing over the past three years now. With 1,503 Finished Vacant homes, the market now has 1.9 months of supply. Single family detached product comprises of only 690 finished vacant; a 1.2-month supply. There are 372 units in Sacramento; a 1.5-month supply and only 318 in the Bay area; a 1.0-month supply. The inventory level of Attached product is 813 finished and vacant units, a 3.4-month supply and another 4,123 units under construction with the majority (4,029) being the in Bay Area.
Lot deliveries in Northern California have slowed dramatically over the past few years, which is helpful for those inventory levels. Lot inventory has declined 11% over the past year and now stands at 18,202 and months of supply declined to only 30. “While seemingly high, these lots continue go quickly as the market continues to improve, and not all of these lots are for sale, or in “A” locations. This slowdown of lot development will make finished lots more desirable and thus spur demand causing prices to escalate,” said Greg Gross,” Regional Director of Metrostudy’s Northern California market.
“Metrostudy expects demand to remain steady in 2014. However, there are some indicators that point to slightly fewer new home starts compared to 2013. Primarily those being lack of lot supply, slowing job growth, economic uncertainty, rising home prices and interest rates and the expected increase in resale home inventory entering the market are all factors which may cause new home buyers to rethink their home-buying decisions during 2014,” said Gross.