Metrostudy: Housing Starts at the Local Level

The drop in national housing starts reported today by the U.S. Department of Commerce indicates that home production is down 65.7 percent from the recent peak. The latest research from Metrostudy, a national housing market research company, indicates significant differences in the trends across local markets.

Metrostudy collects data on a much more detailed basis than the Commerce Department does, rolling up from a 100 percent count of activity in individual projects to market totals. “When analyzing housing supply and demand, it is vital to do so at the local level,” said Mike Inselmann, president of Metrostudy.

There are hundreds of housing markets, and each is on a different trajectory. “Some markets never experienced a price boom, and are therefore having a less severe bust, but they are all suffering badly,” said Brad Hunter, Metrostudy’s chief economist and national director of consulting. “Naples/Ft. Myers starts in subdivisions are off 92 percent from the peak, as of the end of the third quarter of 2008. Phoenix new-home construction is off 75 percent from the peak, while Atlanta is off 84 percent,” Hunter said. Austin (off 49 percent) and Raleigh (off 57 percent) never had a price bubble, and it is remarkable that they are down as far as they are, Hunter said.

Metrostudy collects housing data by visiting each subdivision every quarter, and visually checking each homesite within more than 80 local market areas around the country. “Our research is considered indispensable by the investment community and the homebuilding industry because it allows far more accurate, detailed, and granular analysis than the government’s statistics,” Hunter said.

Metrostudy adds depth to the analysis with the inventory numbers they also collect at the subdivision level. “Finished, vacant inventories are actually coming down, but they remain too high in most markets,” Hunter said. “The markets that have the most serious problems are Central Florida, with 8.9 months of finished, vacant home inventory, South Florida, with 8.3 months, Atlanta, with 8.1 months, and Coastal Los Angeles and Naples/Ft. Myers, each with 8 months.” These readings are all far in excess of the “equilibrium” level of 1.5 to 2.5 months that is typical in a normal market, Hunter said.