New-home Construction Rate Rises Finally but Not Up to the Rates of Last Year
In a report today, The Austin Business Journal wrote that after a cautious slowdown in new construction late in 2006 and early this year, Austin homebuilders are forging ahead, starting more than 1,100 more homes during the second quarter of 2007 than during the first quarter, according to a report from housing research group Metrostudy.
The 4,132 new home starts logged last quarter still remains 8% below the number of starts in second quarter 2006. The annual rate of new home starts, or the number of homes begun in the last 12-month period--is also 8 percent below where it stood this time last year, according to the study.
That's due in large part to a significant reduction in starts on new homes priced below $200,000. Concerned over the size of the existing inventory and decreased buyer demand caused by tightening credit standards, volume builders have significantly curbed their speculative building in that price point. Meanwhile, new home construction in the $400,000 to $750,000 range jumped 66 percent during the last 12 months.
"During the last three years, starts in the $400,000 to $750,000 price range increased more than 23 percent," says Eldon Rude, director of Metrostudy's Austin division. "Relocations to the region and move-in buyers taking advantage of Austin's strong appreciation during the last few years have been the primary catalysts to the surge in demand in the upper price ranges."
Buyers closed on 3,818 new homes during the second quarter, a 13 percent decline from second quarter 2006. But the annual closings rate is up 7 percent from last year to 16,125 units.
On the national front, while the demographic demand, or the number of people who want to buy homes, remains strong, the effective demand, or those who can actually afford homes, has been reduced by tightening credit standards produced by the subprime mortgage debacle.
"Even though the fundamental market remains sound, the homebuilding and mortgage-lending industries have created a series of problems that are delaying a round in home sales," says Mike Inselman, president of Houston-based Metrostudy. "Investor inventory and mortgage defaults continue to be a drag on new and used home sales."