The Idaho Statesman reported today that residential housing is saturated with stagnate inventory that is out of touch with affordability.
The report encompasses Boise, Meridian, Nampa, Caldwell, Star, Middleton Kuna –Ada and Canyon County’s.
Facts supporting the story are from Metrostudy, a consulting firm based in Huston. Metrostudy, which physically inspects most of the subdivisions reports a decline of almost 20% in home starts as compared to 2006. Additional information comes from Intermountain MLS. Last month I personally met with Eric Allen regarding his company’s services. I was impressed with their technology, thoroughness and related services.
What I find most notable about this story is the fact that new home starts above $300,000 remains on the rise while affordable housing starts below $200,000 is falling.
Reporter Joe Estrella wrote:
One surprising item in the Metrostudy were figures indicating that housing starts for homes priced below $200,000 were declining, while starts for homes in the $300,000-$600,000 range continued to rise. Recent IMLS statistics found that home buyers have been shopping for bargains lately.
It is my belief that builders are continuing the path of the past which will ultimately lead to their demise. There appears to be a continued trend of “build it and they will come”.
Analysis of recent sold data illustrates the majority of transactions happen in the price range where there’s the least amount for sale. Don’t get me wrong, I do see the challenge builders face. The problem for most of the areas builders is profitability and satisfactory margins within this lower price range. Few builders can manage the required economy of scale.
I’ve been tracking this trend and have assembled first quarter 2007 spec housing data in comparision to second quarter 2007. My analysis identifies which builders are continuing the same tend of building, and have aged inventory. I’ve identified a willingness to lower asking prices by as much as 20% in some cases. Most price reductions of aged inventory is at 3-7%.
The first-time home buyer has a continued challenge in finding available inventory to choose from and financing too. Lender requirements continue to tighten amid re-defining of credit risks. This is a big deal because when this type of buyer and those looking to move up can’t make it happen, the market skids. It kind of makes sense when you consider we’ve had strong economic expansion for 10 years. Seems we’re in for a break.
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