With strong housing demand continuing in Central Texas, new home starts increased almost 7% in the first quarter compared to the first three months of last year, according to new industry data.
Austin-area builders started construction on 4,294 houses from January through March, a 6.9% increase from the first quarter of 2018, according to Metrostudy, which tracks the local housing market. Starts were up 22% from the fourth quarter of 2018, when Metrostudy's survey crews recorded 3,513 starts, a revised figure from the 3,488 initially reported.
"All in all, the first quarter was a welcome relief to the industry after a challenging end to 2018," said Vaike O'Grady, Austin regional director for Metrostudy. The company's figures cover the five-county Central Texas region that spans from Georgetown to San Marcos.
On an annual basis, for the 12 months that ended in March, builders started work on 16,674 houses, up 1% from the prior 12-month period.
The latest quarterly report comes after a year in which Central Texas saw starts climb to their second-highest level on record. Metrostudy's revised figures for calendar year 2018 came in at 16,398 starts, up from 16,385 in the preliminary count. The peak for a calendar year was in 2006, with 17,784 starts.
More than half of the first-quarter starts were in the $200,000 to $300,000 price segment, the figures show.
The median price for single-family starts in the first quarter was $291,107, up slightly from $290,379 in the same quarter last year.
Mark Sprague, a housing market and financial analyst with Independence Title in Austin, said the latest starts figures "continue to show the strength of the market.
"Other metros, nationally and regionally, are not having as robust numbers," Sprague said. "The national housing market may have plateaued for a while, due to lack of job creation. However the regional (Texas) and local housing market will continue to be significantly under supplied due to stronger job creation. There remains enormous levels of demand in the lower to moderate price ranges."
New home sales slowed late last year due to higher interest rates and a slumping stock market, said Eldon Rude, another Austin-area housing market expert.
"However, with rates falling and the stock market rebounding, prospective homebuyers in Austin were out in force during the first three months of 2019," said Rude, principal of the Austin-based consulting firm 360 Real Estate Analytics. "Our monthly survey of production builders showed year-to-date sales through March were up 13% over last year. If the first three months of the year prove to be a good indicator for the balance of 2019, builders will be in for a better year than they expected."
A continued lack of developed lots is one of the biggest challenges Austin-area builders face, O'Grady said.
"The price for raw land is very high, and some builders are being forced to pass on opportunities because deals just don't pencil," O'Grady said. "Those who opt in are signing up for costly development and construction costs, sometimes exacerbated by lengthy and expensive approvals and permitting times. That makes it tough to meet their target price goals."
Bryan Havel, division president for William Lyon Homes, said the company saw strong sales in the first quarter, especially for first-time buyer homes priced between $200,000 and $250,000.
"While 2018 was a strong year for Central Texas, 2019 has started even stronger," Havel said. "With job growth and population growth continuing at a strong pace in Austin, demand for housing remains robust."
William Lyon Homes, which has been expanding its footprint in Central Texas since purchasing RSI Communities last year, builds in 13 Austin subdivisions. The builder expects to close more than 600 home sales this year in the Austin area.
Last month, William Lyon Homes announced it has purchased 315 acres in Hutto for a master-planned residential development that will have 1,300 homes.
Construction on the yet-to-be-named community, which will be about 2 miles north of downtown Hutto, is expected to begin this summer. Home sales are due to begin in the summer of 2020, with prices starting in the low $200,000s.
Northwest of Austin, sales at the Bryson subdivision in Leander are up 10% over this time last year, said Tommy Tucker, vice president and general manager of the 530-acre master-planned community. Just east of U.S. 183A and north of San Gabriel Parkway, Bryson was acquired in February by Houston-based Johnson Development Corp.
"Traffic (at Bryson) has definitely increased in 2019," Tucker said, noting that young families and empty nesters are among the buyers. "Overall, I believe the Austin region remains strong due to excellent fundamentals including job growth and net migration."
Five builders are constructing homes priced at about $250,000 and above in Bryson: Brookfield Residential, Chesmar Homes, Lennar, Perry Homes and Scott Felder Homes. Planned for 1,261 homes over time, Bryson to date has had 148 home sales, and another 40 homes are under construction.
The Resmark Companies, a residential real estate investment group based in Los Angeles, entered the Texas homebuilding market in February 2018. Although traffic and sales slowed in the fourth quarter of 2018, "they have rebounded nicely in the first quarter of 2019 heading into the spring and summer selling season," said Michael Zarola, senior vice president of investments for Resmark's Land and Housing division.
"The builders with whom we have regular contact report strong net sales and less use of concessions or incentives on appropriately priced new home product," Zarola said. "We have seen strong activity and continued demand for relatively affordable, entry-level and first move-up new homes that are priced between $200,000 and $400,000 in communities that are within a 30-minute commute to the major employment centers in the metro Austin region. The lot supply for this product remains very low with developers doing their best to keep up with demand and deliver lots to homebuilders."
Resmark said the demand seen in its new-home communities "has been fueled in large part by the continued migration of young professionals and families relocating to the Austin area from various parts of the country."
"Builders report that many of their out of state buyers continue to come from all over the country, but predominantly are from California and are involved in the high-tech industry in some capacity," Zarola said.
The Austin new home market is poised to keep expanding, Zarola said, "with continued employment gains experienced and expected over the next several years."
