Austin-area home starts climb 17% in 3rd quarter

Austin’s housing market is still going strong, but rapidly rising prices are starting to slow momentum.

That’s according to housing market research and consulting firm Metrostudy, which released its latest market survey showing that builders started work on 3,123 homes in the third quarter, a 17 percent increase compared with the same period last year.

On an annual basis, housing starts were up 9 percent in the 12 months that ended in September as builders started construction on 10,205 new homes. That 9 percent increase marks a significant slowing from the prior 12-month period, when the annual increase was 30 percent.

“The Austin market has experienced a strong year thus far but momentum has started to slow as builders and homebuyers are starting to feel the pinch of higher costs and home prices,” said Randall Allsup, regional director of the Austin market for Metrostudy.

The region continues to see robust job and population growth, and Allsup said demand for new homes remains strong, especially in areas that are producing entry- level houses priced below $200,000. He said the upswing in starts in the third quarter was primarily due to lots becoming available in high-demand areas where builders rushed to get houses started.

Eldon Rude, a local housing market consultant, said builders are telling him that they are seeing a bit of a slowing in their sales, especially in the $300,000 to $700,000 price range. Part of that is due to the typical seasonal slowing, Rude said, but another factor also could be at play.

“With sharp increases in new home pricing so far in 2014, and with the average annual price for a previously owned home up over 7 percent through August, I suspect there is some level of fatigue among prospective buyers as they are shopping for a home,” said Rude, principal of 360 Real Estate Analytics, an Austin-based research and consulting firm.

On the flip side, builders constructing homes in the $250,000 and below category say their business is picking up, “which is not a surprise given how much demand we have in the lower price ranges,” Rude said.

Metrostudy reported that area builders sold 2,454 new homes in the third quarter, 2 percent more than the year-ago quarter. During the last four quarters, builders sold 9,307 new homes, a 9 percent increase over the prior four quarters.

There were 3,922 new homes under construction during the quarter, a 20 percent increase from the year-ago quarter and the highest total seen since the market peak in 2006, Metrostudy said.

“The number of new homes under construction can either be an early indicator of future closings, but also may harbor higher levels of inventory and a softer market,” Allsup said. “Time will tell whether this indicator is a positive or a negative.”

Despite the recent decline in sales for some price points, Rude said housing demand overall remains strong in the Austin area.

“The primary driver for new home demand continues to be the strong job growth in the region, with the area producing over 30,000 new jobs annually in each of the last three years,” Rude said. “I anticipate that recent trends will hold true and builders will have a very active selling season as we begin 2015.”

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