New home inventory in Austin has increased dramatically in the past year but demand could still outstrip supply if population growth remains robust and building cycles continue to increase.
"No doubt the combination of attractive mortgage rates, strong job growth and positive local economic news helped to propel the market higher," stated a report by Residential Strategies Inc., a Dallas-based market research company.
Home starts, home closings and inventories were all up in 2014 compared to a year earlier, the report said.
Even recent fears of localized market retraction created by declining oil prices are unfounded — at least in Austin, given the tight housing supply, the report postulates.
New home inventory — which includes model homes, homes under construction and finished vacant homes — stood at 7,279 units at the end of 2014, up 46 year over year.
The greatest challenge currently facing homebuilders, according to RSI's report, are the "elongated cycle times" or how long it takes to build a house. Labor shortages are creating delays.
"Reports from the field are that subcontractors and trades are making progress in increasing the size of their labor force, but challenges persist in overall staffing and training," the report states.
Here are some other highlights of the report:
• Builders reported that sales activity through the fourth quarter of 2014 surpassed their own business projections.
• There were 12,354 new home starts through Dec. 31, up 24 percent from the previous year.
• There are 20,828 vacant but entitled homesites at the end of 2014, a 20.2-month supply. Equilibrium is generally considered 24 months, so undersupply is a concern.
• At the end of the year, 9,284 lots were under development, considered a record pace by RSI researchers.
• Resale listings remain tight with a 2.4 month supply, though the inventory at the end of November was 8 percent higher than in 2013 at the same time.
• Tight supply and strong demand will continue to boost home prices in 2015.
• Freddie Mac's weekly mortgage survey for Jan. 8 reports an average 30-year mortgage rate of 3.73 percent, down slightly from a year ago.
Jan Buchholz covers commercial and residential real estate, construction and architecture and retail and restaurants for the Austin Business Journal.