New home construction is booming in 7 US cities.Seattle is the hottest market right now.
Seven markets are sizzling with new home construction today. We rank these markets based on our Burns Housing Market Hotness Index (see graph below and index description at the bottom), which encompasses fundamental supply/demand factors and our market strength ratings.
Seattle. Homes continue to fly off the market in Amazon’s and Microsoft’s backyard. Resale home prices gained 15% YOY. The stock prices of the 31 publicly traded local companies we track increased 51% YOY, the most of all large markets. Seattle also possesses less than 1 month of supply, the lowest of all markets! The extreme supply/demand imbalance pushes Seattle to the top of the index.Dallas. Perfectly situated in the middle of the country, with a pro-growth attitude and no income taxes, demand remains robust in Dallas. Job growth of 2.4% YOY has helped push home prices 65% above prior peak levels. A mob of new builders have entered the market, increasing competition. Currently, Dallas builders maintain 734 active projects (+15% YOY), second only to Houston’s 1,000 active communities. Builders’ margins continue to erode—a cause for caution.Riverside-San Bernardino. The Inland Empire has finally emerged from the last downturn as a hot epicenter of home buying activity. Demand from commuters to coastal job centers remains robust, boosted by rising Asian buyer appeal that has recently been fueled by nonstop China Airlines flights between Taiwan and Ontario. In past housing cycles, Riverside-San Bernardino had a tendency towards oversupply, but we don’t see this happening as single-family permit volume still sits 75% below prior peak. Of the Sizzling Seven, we forecast the strongest new home market growth over the next two years in the Inland Empire (+46%).Salt Lake City. Salt Lake has emerged as a hot new center for tech employment known as the Silicon Slopes. Household names like Adobe are growing alongside smaller startups. Fueled by tech job gains and strong household growth, Salt Lake now employs 17% more people than pre-recession. Strong demand has pushed home prices up 10% YOY, and we project another strong year in 2018.Nashville. With unemployment at only 2.6% and jobs 23% above prior peak, millennials and move-down buyers continue to flock to Nashville for jobs and quality of life. This "it" city has become a hipster and tourism mecca, given the countless honky-tonks and foodie hot spots. Builders and local municipalities have struggled to keep up with the growth. Cost creep remains a concern for local builders as fees and labor costs continue to rise.San Diego.Very tight supply in San Diego has resulted in robust price gains for both new and resale homes. Double-digit employment growth for higher income segments ($120K-$200K) helps offset some of the affordability issues. San Diego’s diverse economy is home to a major biotech center with significant venture capital backing and a large military presence.Phoenix. Phoenix has risen from the ashes and is no longer a foreclosure capital. Some of our builder clients report the best start to the year since 2005! Oversupply is not an issue this time around. Months of resale supply stays low at 2 months, while single-family permits remain 66% below prior peak. Sales volume for both new and resales remains robust at 124K total transactions (second only to Atlanta). Among the Sizzling Seven, Phoenix exhibits the most relative affordability, supporting the MSA in the long term. Phoenix has also transitioned smoothly into a more diversified economy.
We rate the markets based on the following factors:
Current sales and pricing trends, using both quantitative and qualitative data Supply: Months of resale supply as well as new home construction growth Demand: Rate of price appreciation and job growth
According to our proprietary Housing Cycle Risk Index™ and Burns Intrinsic Home Value Index™, Seattle and Dallas have the most long-term risk among top markets right now. If you would like more information, please fill out this form or contact one of our local market consultants for more details on how we can help you assess (or rank) your markets, projects, and opportunities.
Read the original article on John Burns Real Estate Consulting. Copyright 2017.