Housing economy expert John Hunt of MarketNsight and ViaSearch has identified an interesting trend in residential housing contracts across 11 Southeast markets. January home sales were hot, February through April sales cooled considerably, and early reports of May data show sales rebounding and increasing over May 2016.
Hunt explains, “There is an absolute ceiling on home prices, and the market will make corrections as needed to correct pricing. Sellers dropped prices between February and May to hit the price the market would bear. This is why we see such strong May sales data. Home prices dropped to levels buyers could afford.”
He continues, “I don’t see either an imminent collapse or explosive growth, the market is moderating and this is the new normal. Growth is going to be organic and sustainable. New home builders must follow the 80/20 rule to be successful. (New home prices, in most cases, can’t be more than a 20 percent spread above resale on a comparable product same submarket.)”
Hunt anticipates about 5 percent growth over last year. Builders may or may not be able to keep up with this growth based on lack of lots and tight construction lending, but all the signs for continued sustainable organic growth are present. Additionally, in order for new home builders to be successful, they must innovate.
As home builders scramble to meet pent-up market demand, both new and resale homes are settling out at the same year-over-year growth rate for closings. Resale closings, however, still have the lion’s share of the market representing 80 to 90 percent of all transactions in Southeast markets.
Hunt comments on where the growth is coming from, “This is normal organic growth that is trending with job growth and in-migration. Of course, there is also the occasional millennial who decides it is time to join the real world and purchase a home.”
To view an interview with John Hunt, click here.
MarketNsight currently operates in 11 markets across the Southeast, including Atlanta, Augusta, and Savannah, Georgia; Birmingham and Tuscaloosa, Alabama; Charlotte and Raleigh, North Carolina; Columbia and Greenville, South Carolina; and Chattanooga and Nashville, Tennessee.
To schedule a demonstration of the MarketNsight Feasibility Matrix®, call 770-419-9891 or email info@MarketNsight.com. For information about MarketNsight and Hunt’s upcoming speaking engagements, visit www.MarketNsight.com.