New home starts taper off

New home starts slowed in Southwest Florida during early 2019, but closings showed renewed strength.

Retiree demand should keep the regional housing market stable for the next 10 years, although affordable prices and mortgage rates could curb some growth, according to a new report from data supplier Metrostudy.

Builders broke ground on 1,285 local single-family homes during the first quarter, down by 7.2% over the year, Metrostudy said. But the annual start rate of 6,091 units was up by 8% compared with 2018.

Buyers closed on 1,354 new single-family homes, a gain of 19.4% from last year, but still the weakest quarter of the last four. The annual closings rate of 6,008 units was 12.3% ahead of last year.

"The 'Snowbird Season' got off to a slow start in January, as contract pace was off substantially compared to January 2018," said Metrostudy regional director Tony Polito. "However, the stock market has recovered almost to its all-time high set on Oct. 3, 2018, and interest rates have moderated. Couple that with a late Easter, and the season had a strong finish.

"We said last quarter that retiree demand should remain strong over the coming decade, but it will be affected by affordability and interest rates," he added.

The largest gain in home-start activity came in the $400,000 to $450,000 price band, with a near 20% annual growth rate. The largest increase in unit count was for prices over $450,000, where starts jumped by 161 units compared to last year’s annual rate.

"The big concern is the inability to produce product under $250,000," Polito said. "Just 19% of all new home construction is considered 'affordable.'"

Some home builders are reporting an increase in sales volume this year. Lakewood Ranch-based Neal Communities posted 279 sales in the first quarter, including a record 124 during March at its 31 communities.

"After several months of steady sales, we experienced a marked increase in qualified sales traffic and homebuyers ready to move forward in March," said Michael Storey, president at Neal Communities.

Those new home sales are taking a bite out of resales of existing single-family homes. Those sales slumped 13.4 percent in January in the Sarasota-Manatee region, but have since rebounded to near even with last year's levels.

"Most economists and real estate experts agree that the reduction in transactions is more a result of timing of new product delivery than anything," said Michael Moulton, a luxury specialist with Michael Saunders & Co. "These market experts agree that demand remains strong for our region, growing inventory resulting in slower pace of price appreciation, strong homebuilder confidence, and downward trend of mortgage rates are all contributing to our stabilized market."

Lakewood Ranch led the region with 1,171 annual home starts in the first quarter. The West Villages was second at 790, followed by Palmer Ranch at 330, Babcock Ranch at 242 and Silverstone at 176.

Manatee County reported 602 housing starts in the first quarter, down 18.4% for the year. Sarasota County had 526 starts, down 3.0%.

The region has a 1.1-month supply of finished vacant homes. The under-construction backlog stood at 2,429 units as of March 31, or 397 less than six months ago.

"The market has not seen a significant increase in cancellations, and with the reduced starts, builders don’t seem to be starting excessive spec inventory," Polito said. "The market inventory remains balanced."

Top 10 in new-home starts first-quarter 2019

Communities and their annual starts, not including condominiums.

• Lakewood Ranch — 1,171

• The West Villages — 790

• Palmer Ranch — 330

• Babcock Ranch — 242

• Silverstone — 176

• South Gulf Cove — 154

• Grand Palm — 142

• Artisan Lakes — 130

• Milano — 129

• Del Tierra — 125

Source: Metrostudy