Metrostudy’s fourth quarter 2016 survey of the Charlotte housing market shows that new home builders started construction on 2,952 homes, an 18.6% increase from fourth quarter 2015, according to a press release from the company.
Quarterly closings – previously unoccupied new homes that now are occupied – totaled 2,656 units, a 5.6% increase from fourth quarter 2015. The 10,977 annual starts surveyed through the end of fourth quarter 2016 was 5.1% higher than the number of homes started in the same period a year ago, and was up sequentially 4.4% from the trailing four quarter total just a quarter ago. The annual closings figure of 10,365 was 7.3% more than the 9,657 observed in the final quarter of 2015. Sequentially, the total was up 1.4%.
“After enduring an essentially flat market for most of the year, Charlotte area builders and developers made up a lot of ground in the final months of the year,” said Jay Colvin, regional director of Metrostudy’s Charlotte office in the report. “Development pipelines are growing as well, signaling near term relief from critically low lot inventories that have depressed construction activity over the past several quarters. However, the market is still thousands of units below historical production levels, and sustaining the rate of growth has significant challenges. There is concern that the more aggressive-than-normal fall and winter sales activity could result in a sluggish second half of the year as demand is pulled forward.”
While overall market production increased, new home starts on product priced under $200,000 declined 20.3% from a year ago. The segment comprises 19% of Charlotte’s starts, down from 25.4% a year ago, and 30% in 2014. The market between $300,000 and $500,000 is considered to be in equilibrium, with a slight oversupply of housing at 7.8 months’ and a slight under supply of lots at 21.9 months’. The $500,000+ market continues to be the softest market, with housing inventory over 11 months’ and lot inventory over 48 months’.
The 20,273 vacant developed lots in the Charlotte market in fourth quarter 2016 represent a decrease of 96 lots from the 20,369 lots surveyed in fourth quarter 2015. At the current absorption rate, these lots represent a 22.2-months’ supply. 18 to 24 months is the historical range Metrostudy considers healthy given that is the approximate time it takes to entitle and develop a replacement lot. In many instances the current timeline for entitlement and development of lots is substantially longer than 24 months. Additionally, far-flung submarkets contribute greatly to the lot supply, but little towards new home production, meaning where demand is greatest, lot supplies remain short.
Charlotte townhome builders started construction on 444 townhomes in fourth quarter 2016, 48% more than in fourth quarter 2015. 317 townhomes closed in fourth quarter 2016, which was a 13.6% increase over fourth quarter 2015. Annual closings of 1,223, was a 27.3% increase from the 961 units closed in the same period a year ago. The annual starts figure of 1,464 homes was 25% greater than the 1,171 observed through the same period a year ago.
Baring an economic or geopolitical event, 2017 is expected to be a year of robust growth for the Charlotte new home market, the report said. With the lots to build on, new home production is expected to advance quickly in the first half of the year. Higher inventories will bring with it more competition; therefore prices are expected to rise more moderately than in the past couple of years. Production builders who have uncharacteristically participated in infill projects are expected to continue to do so, but more traditional suburban and exurban locations are expected to regain the primary focus in an effort to maintain relative affordability and build more sustainable growth paths. The report concludes, this year should feel a little more like “normal.”