According to Metrostudy’s quarterly lot-by-lot survey of every subdivision, the Greater Salt Lake market started 3,948 new homes during 3Q18, a 17% increase over 3Q17 and up 9% from last quarter.
New home closings totaled 3,385 for the quarter, up 11% over 3Q17 and last quarter. Annual starts increased 21% over last year and as of September totaled 14,000. Annual new home closings totaled 12,013, up 14% compared to the same period last year.
“The gap between starts and closings continues to grow and could result in an increase in inventory, although current inventory levels remain healthy,” said Eric Allen, Regional Director of Metrostudy’s Salt Lake City market. “The gap is currently 14%, up from the 9% gap recorded in 3Q17. The growth in attached housing is a large driver of this increase as it takes a little more time to build this product, however we anticipate closings to keep pace. Annual starts for Attached homes increased 45% compared to last year, compared to annual new home starts for Single-Family Detached homes, which increased 12% compared to last year.”
With rising material prices, short labor supply and increasing demand, new home prices have increased every quarter for the past few years and are expected to stay high. As of 3Q18, 51% of all new homes started in the market are priced above $350,000. Currently, the median price for a new Single-Family Detached home in the Greater Salt Lake market is $385,600, a 7% increase compared to this time last year and 2% higher than last quarter. The median price for a new Attached home/unit is now $269,200, up 12% from last year at this time and 2% above last quarter.
New home inventory in the Greater Salt Lake market is rising at a rapid pace, but remains within equilibrium levels. As of 3Q18, total new home inventory (which includes models, homes under construction and finished vacant homes) in the market was at 9.1 months, up from 8.1 months recorded at this time last year, and there was a total of 9,119 homes in inventory, up 28% from 3Q17 and 7% above last quarter. Of this total, 7,965 homes were under construction, up 33% YoY and up 7% QoQ. Based on the current pace of absorption, this is an 8-month supply, up from 6.8 months last year at this time. Under construction inventory continues to increase because of market expansion, but also the time to build a home is increasing due to the labor shortage. As of 3Q18, there were 824 finished vacant homes in the Greater Salt Lake market, up only 2% compared to 3Q17 and 3% above last quarter. This is a 0.8-month supply, down from 0.9 months recorded in 3Q17 and unchanged from last quarter, well below the range of 2-2.5 months Metrostudy considers equilibrium for finished vacant inventory. New home inventory for Single Family Detached product had an 8-month supply, up from 7.5 months in 3Q17. Under construction inventory was at 6.8 months and finished vacant inventory was at 0.8 months. New home inventory for Attached units increased 53% over 3Q17 with an 11.7-month supply, up from 9.7 months in 3Q17. Under construction inventory was up 63%, a 10.7-month supply, however finished vacant inventory was down 2% and a low 1-month supply.
While new lot development has increased in the Greater Salt Lake market, lot inventory remains below equilibrium. There were 14,705 new lots delivered to the market over the past year, 66% of which were for single-family detached homes. As of 3Q18, there were 13,707 Single-Family Detached lots on the ground, up 5% from last year, but still below equilibrium with an 18-month supply. Vacant lot inventory for Attached homes increased 3% from last year to 2,582, however at 6.3 months of supply, lot inventory is well below the equilibrium range of 18-24 months.
‘The Greater Salt Lake market remains strong and is expected to have another banner year,” said Allen. “The market has benefited from rapid job growth in Greater Salt Lake over the past few years and is projected to remain healthy in the foreseeable future. However, it will be important to monitor inventory levels as we move into 2019.”