Building Not Keep Up With Inventory Needs

In a survey from Metrostudy, Q3 2017 shows builders in Austin are starting more homes than they have in a decade, with 16.719 annual starts and up to 19.1 percent compared to the same time last year. It wasn’t since before the Great Recession that Austin had more than 16,000 annual starts; the peak of starts was 18,406 in Q3 of 2006.

Compared to last quarter, starts are up 4 percent and 12.5 percent year-over-year, with 4,586 starts recorded by Metrostudy in the third quarter. Quarterly closings also rose, but not as much, with 4,107 closings in Q3 2017 compared to 3,592 last year. Annual closings pace had a 7.8 percent increase from 13,229 last year to 14,263 in Q3 2017.  

Despite these increases, labor is experiencing a shortage, according to Vaike O’Grady, Regional Director of Metrostudy’s Austin housing market. “The impact of the recent Texas hurricane is likely to add to the challenge of finding qualified labor willing to perform development and construction work at a reasonable price. In a recent Metrostudy survey, more than 70% of respondents in Austin, Dallas and San Antonio said that Hurricane Harvey will affect their ability to find labor. Moreover, more than 85% of the respondents said that they expect that the hurricane will affect the price and availability of materials. That is tough news for a city that is struggling with how to provide housing for the ‘missing middle.’”

Builders also reported tightened margins due to increased labor and materials costs, as well as permitting delays and added costs from municipal regulation. Regardless, developers are trying to add more supply. The summer of 2017 marked the first time that home sales reached over $1 billion for six straight months. “As in prior quarters, the fuel for the market is in in the $200,000 to $300,000 price range,” said O’Grady. “That segment generated 8,000 starts during the past 12 months, making up nearly half of the market. Starts outpaced closings across every price band. We are seeing more builders add “value” lines and smaller product in an effort to capture market share.”

The full press release can be viewed here.