Real Estate Blog
Monday, April 06 2009
New home builders entered 2009 with the intent to sell their current inventory to help reduce the impact of a tightening economy. During the first quarter of 2009, there was a 47% decrease in new home construction starts compared to the first quarter of 2008. On 02 April 2009, The Austin American Statesman reported 1,215 homes were built in Jan- Mar 2009 compared with 2,297 homes built in Jan- Mar 2008.
I've included the full-length article below for your enjoyment. Please feel free to contact Susie Kang at 512.480.8384 or at SusieKang@JoaRealty.com for more information regarding Austin new home sales.
New home construction down 47%
Fewer home starts may mean end to buyer incentives.
New home construction in Central Texas continued to slide in the first quarter of 2009, as builders started 47 percent fewer homes than in the same period in 2008, according to a new report.
But builders are selling off their supply of homes, and the dwindling supply means incentives for buyers may wane, too, local housing experts say.
In addition, they say that as homebuilders scale back on developing new lots to build on, parts of the region, especially those closer to the central city such as Circle C, could face a lot shortage as the economy rebounds.
Builders started 1,215 homes from January through March compared with 2,297 a year earlier, according to a report issued Wednesday from market research firm Residential Strategies Inc.
Builders are focusing on selling off their inventory, said Mark Sprague, Austin partner for Residential Strategies. Builders closed 2,145 sales, 31 percent fewer than a year earlier.
Late last year, as bad economic news mounted, would-be buyers began cancelling orders at a higher rate. As a result, "builders entered 2009 with more finished inventory than they wanted," Sprague said.
In 2008, new home construction in Central Texas plunged to its lowest level since 1997, with builders starting work on 8,987 houses. In 2006, they started 16,802 houses. Now, some builders have left the market, and others are winding down operations or are in bankruptcy.
Despite the national housing downturn and recession, Central Texas' housing market has held up better than many around the country, local housing experts and regional economists say.
Central Texas still is adding jobs, although at a slowing rate, as many other parts of the country are losing jobs.
In addition, Sprague said there is not an oversupply of homes on the market. At the current sale pace, it would take 5.3 months to sell all the new homes on the market. A six-month supply is considered balanced.
In the first quarter, the median price for a new home under construction in the Austin area was $216,448, up from $212,897 a year ago.
Terry Mitchell, a local developer, said new home prices here remain stable because Austin's economy is still healthy.
Also, the market is tightening, which could cause prices to rise, Mitchell said.
Builders, particularly the big national companies with significant losses in other markets, don't have the capital to expand and aren't developing new lots or building new subdivisions, Mitchell said.
"All that means is economics 101," Mitchell said. "When supply gets tight and demand remains the same, prices will go up."
And with the latest figures showing nearly twice as many new homes sold as started, "this market may get tighter sooner than I imagined," Mitchell said, adding that some areas could face a shortage of lots and homes in a year to 18 months.
Eldon Rude, director of the Austin office of a housing research firm, said the Austin area "is moving toward some of the lowest new home inventory levels we have seen in our market in the last 10 years."
With fewer homes for buyers to choose from, Rude said, "builders are less likely to offer the kinds of concessions that were necessary to attract buyers this time last year."