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GROWING, GROWING, GONE

Pricing growth continues alongside demand for new homes,

but consumer demand is breaking sooner than price hikes relent

BY CHARLOTTE O’MALLEY

THE INCREASE IN AVERAGE NEW-HOME

DEMAND ACROSS ALL MARKETS from

October 2015 to October 2016

MARKETS REPORTED AN INCREASE IN HOME

DEMAND DURING OCTOBER, in stark contrast to

September, when demand increased in 0 markets

O

ur 36 -market demand

index recently showed

softening demand for

new homes for the first

time in 2016 , largely due to ongoing

price growth.

In October, we saw demand for

new homes recover, but pricing

issues continue to be a top con-

cern among Metrostudy regional

directors. In 11 markets, regional

directors reported an increase in

buyer interest or traffic to sales

centers in October, compared

with zero a month prior.

While the average demand

score across all 36 markets

increased 2.96% month over

month, commentary from our

directors indicates that circum-

stances have changed very little

for buyers looking to enter the

market, and that prices in areas

like Seattle, Denver, and Dallas-

Fort Worth are still reaching all-

time highs.

The most recent release of the

S&P CoreLogic Case-Shiller Home

Price Index showed continued

price growth, with August 2016

levels approaching levels not seen

since October 2007. As both

existing and new-home prices

increase, many buyers are being

priced out of the market and forced

to rent, despite their desire to buy.

Regional directors in a handful of

markets—such as Northern Cali-

fornia—report that finished vacant

inventory is also reaching levels

not seen since the recession. The

problem is cyclical, as high con-

struction costs have caused higher

prices, but higher prices are now

keeping buyers away.

Conversely, in markets like

Austin, Texas, and Reno, Nev.,

low levels of finished inventory (at

affordable price points) are push-

ing buyers to the resale market,

thus driving prices higher.

The economy is strengthening

across the country, but positive

employment reports are doing

nothing to ease price growth, and

affordability issues continue to

impede potential buyers. Accord-

ing to regional director Paige

Shipp, rapid price growth and a

lack of proportional wage growth

has created a price ceiling, which

can now be seen in multiple

markets across the country. B

S&P CORELOGIC CASE-SHILLER HOME PRICE INDEX

Home prices are gradually rising to levels not seen since before the housing crisis.

2006 2008 2010 2012 2014 2016

250

225

200

175

150

125

NON-SEASONALL

Y ADJUSTED

COMPOSITE SCORE

October 2007

192.98

20 -CITY COMPOSITE 10 -CITY COMPOSITE U.S. NATIONAL HOME PRICE INDEX

August 2016

191.66

DECEMBER 2016