Less demand for entry-level homes pushes Austin 2Q starts down
Looks like the new starter home segment of Austin’s sales market is slowing down a bit, which is great news for landlords. The renters who would otherwise be purchasing those homes are remaining in the rental pool. Also, many of the starter homes were being purchased by investors, which means the rental supply won’t be gaining that additional inventory, which is no doubt why we’re seeing strong activity in the rental market.
The $300K+ end of the sales market is still very strong. Overall, the ABJ article paints a good and accurate picture of what we are experiencing in our actual business.
Austin Business Journal – 2:30 PM CDT Thursday, June 28, 2007
The slowdown continues on new home starts in the Austin area as homebuilders put the brakes on entry-level product.
Builders started 3,367 units in the second quarter, down 27 percent from second quarter 2006, according to the most recent report from Dallas-based housing consultancy Residential Strategies Inc. The start rate for new homes over the last 12 months is also down 12.6 percent to 14,568 compared with the previous 12-month period.
“Builders have reported to us that buyer traffic under $200,000 remains sluggish,” says Mark Sprague, Austin partner for Residential Strategies. “The $250,000 to $600,000 price points remain strong, but not as frothy as in recent quarters.”
The annual rate for home closings stands at 15,556, up 6 percent from the annual rate in second quarter 2006. With the slowdown in new construction, closings continue to outpace starts. Sprague says while Austin is still outperforming most other U.S. markets, builders are being careful not to initiate too much speculative inventory.
Sprague says the strength of the local market remains at the upper-end of the price spectrum. A total of 3,556 homes priced above $300,000 were closed on in the last year, up just slightly from the 3,534 homes that closed in the 12-month period that ended last quarter.
The national median length of time completed homes sit on the market was 5.7 months in May according to the National Association of Home Builders. By comparison Austin’s finished inventory stayed on the market about 2.08 months.
With 15,556 closings on new homes in the last year, Austin is at the peak of the national market. In contrast, new home sales for May were down 15.8 percent compared with a year earlier, a report from the U.S. Commerce Department shows.
Sprague says Austin remains a vibrant market. “While the area is not immune to the negatives of the national housing market conditions, we continue to see positive signs for residential growth,” he says.