Co-authored by Danielle Nguyen, Research Analyst
Ten years ago today, our company published Strategies to Navigate 5 Stages of the Housing Cycle and followed that up with a 7-minute educational cartoon on the housing market. To commemorate the 10-year anniversary of those analyses, we are sharing the graphic we produce each month that shows where 33 major markets are positioned in that cycle.
Early recovery. Only one market, Chicago, remains in the early recovery phase of the cycle. Despite being one of the largest resale markets in the country, new home construction has struggled to take off. Builders must execute perfectly on price, location, product, and schools to achieve success. Chicago remains one of our only Slow markets, and we worry that looming state and local fiscal issues and population loss will continue to prohibit the Chicago recovery from gaining full momentum.
Ripening recovery. Minneapolis, Indianapolis, Washington, DC, San Antonio, Philadelphia suburbs. These early expansion phase metros warmed up and are exhibiting more normalized sales and pricing conditions. We upgraded many of these markets from Slow to Normal in the past year as their recoveries finally stabilized and gained traction. The large new home price premiums in Minneapolis, Indianapolis, and Philadelphia keep the sales pace moderate for builders.
Big volume market acceleration. Riverside-San Bernardino, Las Vegas, Tampa, Phoenix, Orlando, Sacramento, Jacksonville, Houston. These big volume markets recovered very slowly, partially because construction is such a big part of their economies. Single-family new home construction has recently accelerated at a very fast clip—rising over 12% YOY in several of these markets. Most of the markets in this group experience Normal market conditions, with Riverside-San Bernardino as one of our hottest current markets. We expect Riverside, Las Vegas, Phoenix, and Tampa to notch the highest new home revenue growth over the next two years.
Nearing exuberance. Atlanta, Charlotte, Los Angeles, Raleigh. These expansion metros have moved closer to the exuberance phase. The nearing exuberance markets exhibit Normal current market conditions and have yet to reach the frenzied sales or pricing of the exuberance markets. Los Angeles’ current conditions are Strong at infill communities, but due to the patchiness of sales at projects in more outlying locations, the market is not experiencing buyer frenzy overall. In Atlanta, Charlotte, and Raleigh, certain submarkets and price points accelerated quickly following a delayed housing recovery. However, sales have cooled in A locations at the higher price points, and the entry segment is now enjoying a strong upswing.
Early exuberance. Denver, Orange County, San Diego, Salt Lake City. These markets reached the exuberance phase and display hotter housing market conditions through above average sales rates and price appreciation. Low resale supply paired with solid job growth are driving additional new home demand, particularly in the relatively affordable price points. San Diego and Salt Lake City are two of our hottest current markets. Orange County’s luxury segment may be closer to maturing exuberance, given significant supply +$1MM, but more modestly priced product (especially in highly desirable submarkets) continues to sell very well.
Maturing exuberance. Austin, Boston, Dallas, East Bay, Manhattan, Miami (single-family detached product), Nashville, Portland, San Francisco, San Jose, Seattle. Technology jobs drive most of these markets, and we expect a correction in some segments of the technology sector as indicated in our previous newsletter. Many of these maturing exuberance markets were among the first to recover this housing cycle. Current employment is well above prior peak in all of these markets, with Austin, Nashville, and Dallas employment +20% above 2009 levels—the highest of the top 33 markets. Strong job growth in high-wage sectors has buoyed these markets, but now weakening affordability and decelerating job growth is cooling demand after a sustained run-up.
In summary, the housing markets around the country have recovered at different paces and have different outlooks. Our research team tracks these differences and can help you make informed decisions. Please reach out with questions on how we can best advise you on your markets.