Bill Morris: New Construction and Builder Confidence in Austin

New Construction and Builder Confidence in Austin

Once again I am prompted to write by articles from the national press:

Without any doubt there is reason for concern about the near-term direction of the U.S. economy, and two rounds of homebuyer tax credits have distorted seasonal demand patterns, leaving no reliable way to predict market activity in the coming months.  In the Austin area, school begins again next week and that is likely to suppress home purchases by families with school-aged children.  Regarding new construction and builder confidence in the area, though, here are some charts and comments that I hope are useful:

The newest "final" data that I have found on new single-family residential building permits in Texas runs through June 2010:
Austin Area Building Permits Thru June 2010
The market peak in 2006 is obvious, as is the two-year decline that followed.  Note the clear upward trend since November-December 2008.

Focusing more narrowly on the Austin metropolitan area:New Construction Units Sold July 2009 - July 2010

The number of new homes sold in July 2010 was down 40% compared to the previous month.  Remember that the second tax incentive program initially required closings by the end of June.  It was subsequently extended to allow builders time to complete in-progress homes, but most transactions were completed within the initial deadline.

But look at what happened to pricing in that down month of July!
New Construction Median Sold Price July 2009 - July 2010
My personal experience in the past several weeks is that demand has actually gained some ground in higher price ranges that were not significantly impacted by the tax credits.
This new construction data matches that experience.

The number of pending contracts for new houses is also interesting:
New Construction Pendings July 2009 - July 2010
And the number of new homes still on the market in July was up, while the supply-and-demand picture and time on market remain quite acceptable:
New Construction Units For Sale July 2009 - July 2010New Construction Months Supply of Inventory July 2009 - July 2010
Most analysts consider 6 to 6 1/2 months of inventory to be a "balanced" market, and as I have pointed out in recent months, Realtors® and builders in many other parts of our great country would consider 75 days on market to mean "back to boom times." 

Of course, it may be that a comprehensive survey of home builders in the Austin area will show that they lost confidence in August, just as reported nationally.  The builders I talk to, however, while cautious, aren't waiting for the sky to fall, and this recent market performance is relatively positive given conditions in other places.

Bill F. Morris, ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
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Comment balloon 0 commentsBill Morris • August 17 2010 07:30PM