Austin-area housing starts surge in third quarter


Metrostudy: Fuel for the market is in the $200,000 to $300,000 price range

Builders challenged by labor shortages, rising costs

Central Texas new-home construction surged to a 11-year high in the third quarter, the latest numbers show.

Austin area builders started work on 4,586 houses in the third quarter, up 12.5 percent from the same quarter the previous year, according to Metrostudy, which tracks the figures. The nearly 4,600 starts marked the highest level since the third quarter of 2006, when a record 5,041 starts were recorded, said Vaike O’Grady, Metrostudy’s Austin regional director.

On an annual basis, home starts in the Austin-Round Rock metro area — which stretches from Georgetown to San Marcos — also reached their highest level since late 2006. Builders started construction on 16,719 houses in the 12 months that ended in September, up 19.1 percent from the prior 12 months.

“It was prior to the ‘Great Recession’ when Austin last added more than 16,000 annual starts,” O’Grady said in an email. Calendar year 2006 closed with 17,784 starts, she said. The annual peak came in the 12 months that ended in September 2006, when Metrostudy recorded 18,407 starts, she said.

For several years running, the Austin area housing market has been on a hot streak. Housing demand has been primed by job growth — a relatively healthy 2.3 percent rate, Metrostudy said — and population growth. However, housing supply has lagged demand, an imbalance that has been driving prices ever higher, industry experts say.

Builders have been doing their best to add more supply, Metrostudy said. Once again, the metro area hit a new record for annual lot deliveries, as developers brought 19,007 shovel-ready lots to market, the highest level ever, Metrostudy said.

Also, total inventory — that’s model homes, finished vacant homes and homes under construction — was up 29.4 percent year over year, to 10,816 homes, the most ever recorded in the local market, Metrostudy said.

The increase in inventory “has led to fairly aggressive discounting among new home builders this quarter,” said Ken Langston, the Austin division president for KB Home, whose Central Texas starts are are up 7.5 percent year over year.

As in prior quarters, demand is strongest for homes in the $200,000 to $300,000 price range, O’Grady said.

“That segment generated 8,000 starts during the past 12 months, making up nearly half of the market,” she said.

The median base price for new homes in the quarter was $287,465. That median price is $297,500 for the full year to date, Metrostudy said.

“Housing prices continue to rise, pushing many Austin-area home buyers further outside the city limits to communities such as Manor to find more affordable choices,” Langston said.

One constraint on the market, locally and nationally, is a labor shortage, which builders have been facing for a signficiant period of time, according to Metrostudy.

Metrostudy said there is anecdotal evidence that the shortage has beeen exacerbated in part by federal immigration policy changes. And the impact of Hurricane Harvey which hit Texas Aug. 25 is likely to add to the challenge of finding qualified labor, Metrostudy said.

“In a recent Metrostudy survey, more than 70 percent of respondents in Austin, Dlass and San Antonio said that Hurricane Harvey will affect their ability to find labor,” Metrostudy said. “Moreover, more than 85 percent of the respondents said that they expect that the hurricane will affect the price and availability of materials.”

That’s tough news for a region that already is struggling with affordability and trying to provide a range of housing types and price points to meet demand, Metrostudy said.

“Builders report that margins are being squeezed not only by increased labor and materials costs, but also due to permitting delays and added costs because of increased municipal regulation. That makes it hard to keep consumer prices down,” O’Grady said.

But even as new home prices continue to climb as the cost of land, labor and materials escalate, buyers in the Austin area are finding ways to absorb the price hikes as shown by the increasing pace of closings in recent quarters, said local housing industry consultant Eldon Rude, principal of 360 Real Estate Analytics.

Despite the slower pace of job growth this year, Rude said his company’s research suggests that pent-up demand for housing will keep the market strong well into 2018. “However, if the pace of job gains continue to slow the demand for new homes will eventually begin to moderate,” he said.

Reader Comments ...

Next Up in Business

Asian grocer 99 Ranch Market sets Austin opening date
Asian grocer 99 Ranch Market sets Austin opening date

Nearly two years after it was first announced, 99 Ranch Market is almost ready to make its debut. The Asian grocer, which has more than 40 locations nationwide, will open its doors March 3 in The Crescent, a shopping center at 6929 Airport Blvd. in North Austin. The store, the first 99 Ranch Market in Austin, has a companion liquor store located in...
Meet Janice Bryant Howroyd, the first African-American woman to run a $1 billion business
Meet Janice Bryant Howroyd, the first African-American woman to run a $1 billion business

Janice Bryant Howroyd, 65, is founder and chief executive of Act 1 Group, an employment agency that also provides consulting and business services, including background checks and screening. She’s the first African-American woman to operate a company that generates more than $1 billion in annual revenue, according to Black Enterprise Magazine...
$12 million renovation project set for Great Hills Country Club
$12 million renovation project set for Great Hills Country Club

Construction is due to start this month on an all-new Great Hills Country Club in Northwest Austin, which will replace the club that went up in the mid-1970s. The new, $12 million complex will consist of a two-story, 27,000 square foot clubhouse; a one-story community recreation building with 4,500 square feet; and a pool pavilion, plus new parking...
Up the Ladder

Banking Wells Fargo Business Banking has named Mark Metcalfe division manager for its Central Texas region. E-Commerce Timicoin has named Joyce Lignell to lead its advisory board. Energy Jones Energy has named John Lovoi, Paul Loyd Jr. and Scott McCarty to its board of directors. Industry associations The Texas Association of Community Health Plans...
Legislature expected to weigh in on Austin sick leave rules
Legislature expected to weigh in on Austin sick leave rules

Debate over a requirement that businesses in Austin provide employees with up to eight days of paid sick leave annually might be just getting started, despite the City Council’s approval of the measure early Friday. But the setting for the next fight is likely to be the Texas Capitol, not City Hall, according to representatives of a number of...
More Stories