Greater Salt Lake City housing 1Q18: Strong growth continues as rising prices push entry-level buyers out of the market

Metrostudy’s 1Q18 lot by lot survey of the new home market in the Greater Salt Lake market shows that production remains very robust, with the first quarter starting the year on a high note. 

New home starts (both attached & detached) during the first quarter totaled 3,028, while down 15% from last quarter, is 27% higher than 1Q17. Closings for the quarter dropped 16% from 4Q17, however are up 13% from last year to 2,548. Annual starts as of March totaled 13,022, which is 20% higher than last year at this time. Annual closings rose 14% to 11,321. Starts outpacing closings, regardless of how much, indicates an expanding housing market, which has been the case in Salt Lake since 3Q12. Annual starts for Single Family detached homes increased 13% compared to last year for a total of 8,830 and annual closings increased 10% to 8,054. Annual starts for Attached (for sale) homes totaled 4,192 as of March, a 41% increase, and closings rose 28%, for a total of 3,267.

“Over the past 12-18 months production for new homes priced from $250,000 – $800,000 has been growing at a fairly similar pace, said Eric Allen, Regional Director of Metrostudy’s Utah / Idaho offices. “New home starts in these price segments have increased 28% over the past year and now make up 81% of total starts market share. New home production below $250,000 continues to decrease, pushing entry level buyers out of the market. As costs related to land, materials and labor increase, along with high demand from buyers, new home prices are now higher than those recorded at the peak in 2006. The median price for a new Single Family home is currently $369,900, which is a 5% increase over 1Q17 and is now 2% higher than the peak price of $362,000 recorded in 1Q08. The median price for a new Attached home/unit is $266,650 which is up 11% from 1Q17 and now sits 15% above the previous peak of $230,000.”

Total inventory (which includes models, homes under construction and finished vacant homes) increased 6% from last quarter to a total of 8,224, which is an 8.7 month supply. New home inventory for Single Family Detached homes currently sits at 5,079, which jumped 18% from last quarter and currently translates to a 7.6 month supply. There are now 4,261 homes currently under construction, which increased 3% from last quarter and is a 6.3 month supply, well within the 4-6 month equilibrium level. Finished vacant inventory is up 12% compared to 1Q17, however decreased 8% from last quarter to 552, and currently translates to a .8 month supply. This is far below the level considered to be equilibrium of 2-2.5 months. New home inventory for Townhomes increased 45% over 1Q17 and up another 18% from last quarter to 2,478 units. Finished vacant inventory has actually increased 46% from last quarter, however the supply remains at a very low level of .8 months, which has been nearly unchanged for the pasts 6 quarters. Under construction inventory for Condo’s has increased 13% from last quarter to 570, an 11.5 month supply and finished vacant inventory decreased – 18% to 95, which is a low 1.9 month supply.

During the first quarter of 2018 developers delivered 2,712 new lots to the market, 34% fewer than last quarter. Annual lot deliveries totaled 12,433, up 24% compared to this time last year. With annual starts outpacing lot deliveries, the supply of vacant developed lots continues to tighten, which unfortunately will result in increasing lot prices. There are currently 13,323 vacant developed Single family detached lots on the ground, which is down 2% from last quarter. Lot supply is now at the lowest level since 2006. Vacant developed lot inventory for attached homes decreased 2% from last quarter for a total of 2,527. Based on the current pace of absorption this translates to a very low 7.2 months. Healthy equilibrium for lot inventory should range from 18-24 months, therefore the market overall is experiencing a shortage of finished lots, especially for homes under $500,000. The spring selling season is now in full swing as builders report a steady increase in traffic when compared to just a few weeks prior. We expect the Salt Lake market to have another strong year in terms of housing and economic growth.