According to Metrostudy’s quarterly lot-by-lot survey, builders in the Greater Salt Lake market started a total of 10,778 new homes during 2016, 17% more than 2015.
Annual new home closings totaled 9,798 for the year, a 15% increase over 2015. If not for the severe labor shortage, new home production would have been even higher, however builders are struggling to find enough trade labor to build homes, and as such the market can only grow so fast. New home starts during 4Q16 are up 24% compared to last year, for a total of 2,884 and closings increased 8%, to 2,554. Annual starts for Single Family detached homes increased 17% during 2016 for a total of 7,882, and annual closings totaled 7,264, up 18%. Annual starts for Attached (for sale) homes totaled 2,896, an 18% increase, and closings rose 7%, for a total of 2,534. Quarterly starts saw the most dramatic increase with a 52% increase over 4Q15, for a total of 955.
“New home production during 2016 was very strong, and while not back to peak levels, the market is definitely experiencing robust growth,” said Eric Allen, Regional Director of Metrostudy’s Utah/Idaho region. “Still, the ability to deliver a new home under $200,000 in the Greater Salt Lake market is diminishing quickly. New home starts in this segment have decreased 17% compared to last year, while the majority of this activity is for attached product. The $200,000-$250,000 price segment has increased 15% since last year, however 70% of homes in this segment are for attached product. The largest increase has occurred in the $350,000-$400,000 and $500,000-$800,000 segments, which have both increased 35% compared to last year.”
With only 23% of all new homes built in the last year priced under $300,000, affordability is an area for concern as buyers continue to get pushed out of the market. As such, with the pressures of high land prices, low labor and high demand from out of state buyers, controlling costs is very difficult for builders. The median price for a new Single Family home is currently $348,500, which is 3% higher than last year and 1% above last quarter. The median price for a new Attached unit is $233,000 which is a 5% increase from last year, and up 1.4% from last quarter.
With the increase in annual starts, vacant developed lot inventory has decreased 8% since last year. There were a total of 9,384 new lots delivered to the market during 2016, which is an 18% increase over 2015. There are currently 13,852 (single family detached) vacant developed lots (VDL) on the ground, which is down 9% from last year, a 21.1 month supply. Vacant developed lot inventory for townhomes decreased 3% from last year to 2,441, an 11.3 month supply. There are 521 condo lots on the ground, down 6% from 4Q15, and is a 20.0 month supply.
The Greater Salt Lake economy and housing market remains very robust, however with this growth does come other growing pains. With demand at record levels, builders are struggling to keep up the pace of construction and keeping prices in check. As such, if we can’t start delivering more affordable lots to the market the entry level buyer will continue to get depleted, even more so in the wake of increasing interest rates. The key factors for 2017 will be maintaining prices for entry level buyers, while being diligent in delivering desirable product to the market.