I listened in on a webinar from MetroStudy last week that focused on the Rocky Mountain region. Mark Boud, their chief economist estimates that home builders will complete 1.25 million homes this year, the same amount they built in 1992, when 68 million FEWER people lived here. Ouch!
Mark also estimates that nationally there is a shortfall of 2.5 million housing units, which means builders are behind by 2.5 million homes and apartments and it will take several years for builders to catch up. Mark believes that builders can catch up nationally by 2023. Finally, Mark is predicting that higher mortgage rates and slower job growth could cause home prices to start declining at a national level in 2021 and 2022. I think that’s doubtful as I think it will take builders longer than 5 years to catch up with demand as younger Millennials start to create households in the next 5 years. Locally, for metro Denver here is what I learned——-
- Builders completed roughly 10,000 new homes in 2017 and they were hoping to build 11,000.
- Builders started 3,003 new homes in the 4th quarter.
- From 1997-2006 builders built over 15k new homes a year for 10 consecutive years! Builders built and sold over 20k homes in 2005! Thus, supply is still at least 50% below what builders were building back then.
- The average price of a new home last year was $560k, with most new homes priced in the $450k-$700k range.
- Homes under $300k are pretty much extinct and homes under $350k are getting there according to John Covert who is their Regional Director.
- Last year townhouse starts rose 25% from 2016 and they now represent 25% of all home starts. This is a way to make housing a little more affordable.
- Condo starts rose 7.4% and single family detached starts were up just 2.4%.
- New homes are taking 7 months to complete on average which is double the time it took 10 years ago.
- There is only a 15 month supply of vacant developed lots under 7,000 square feet in the metro area, a 20 year low! But, a 51 month supply for larger lots.
There is only 1 month supply of new finished home inventory.