Housing Market Getting a Bit Spooky

We asked our consultants what is spooking their markets and learned the following:

• San Diego. “Current job growth numbers indicate that the market should be stronger than it is. However, stubbornly high unemployment rates create uncertainty and limit wage growth, keeping some buyers out of the market. Also, lack of new home inventory is keeping total sales at historic lows.” – Pete Reeb

• Chicago. “Conditions are slightly softer in the Chicago market due to political uncertainty at the state level and limited supply in strong locations. Builders are developing lots again in A and B locations, which won’t be delivered until next year.” – Lance Ramella

• Seattle. “Declining affordability and rising land prices and construction costs spooks builders. Home purchases in Seattle’s A locations such as the East Side suburbs are already limited to the elite few who can afford them, and the market’s expansion northward into Snohomish and southward into Pierce continues to manifest itself in rising land and home prices in these traditionally more “attainably priced” communities.” – Ken Perlman

• Washington, DC. “The DC region suffers from federal budget cuts that have decimated the high wage professional services (i.e., government contractor) employment sector. If budget cuts continue into future years as legislated, then we can could be slow for some time. However, an informal survey of large government contractors tells me that procurement for defense-related work is expected to stabilize, and non-defense procurement will increase in 2015.” – Dan Fulton

• Riverside-San Bernardino. The Inland Empire had a soft spring selling season due to new FHA loan limits and an increase in new home inventory. Once a few builders increased incentives to spur sales, the rest followed in a chain reaction.” – Greg Tsujimoto

• Tampa. “An increase in new community openings, combined with flat year-over-year home sales, resulted in more competition for builders. But with employment still below peak levels and growth in the higher-income job sectors, demand should improve in 2015. ” – Lesley Deutch

• Southeast. Southeast builders sold through their inventories in 2013, and the development pipeline has been slower to bring quality lots desperately in need this year. Demand remains strong, but without the right supply and timing of lot deliveries, several builders are concerned about their 2014 actual closings vs. plan. Good news is that several builders are getting into positions to execute extremely well in 1H15.” – David Kalosis

• Texas. “The recent plunge in oil prices spooks many. Texas markets have enjoyed robust price appreciation over the past two years, which was welcome in a region historically known for volume, not margin. However, increasing prices threaten affordability as supply rises to meet demand.” – Paige Shipp