Snohomish County’s lot supply pipeline and new construction inventory is full of developments, vacant lots and new construction homes that are having difficulty selling. Through the real estate growth of the new millennium, builders were participating in one of the largest land grabs in recent history and it’s that land grab that developers have to deal with now.
New construction homes are just not selling at the rate in which builders had become accustom to in 2000-2007 and now, late 2008, new home sales are continuing to decline. In March 2007 there were 486 new construction sales, in March 2008 there were just 243 and in September there were 155. The result is mass standing inventory that is selling at a slower rate each month and it just just can’t be absorbed with price slashing techniques and/or buyer incentives.
Snohomish County New Construction Update
| Market Area | ||||
| Alderwood | ||||
| Arlington | ||||
| Cathcart | ||||
| Everett | ||||
| Granite Falls | ||||
| Marysville | ||||
| Northcreek | ||||
| Northwest | ||||
| Paine Field | ||||
| Sky Valley | ||||
| Lake Stevens | ||||
| Southwest | ||||
| Tulalip | ||||
| Totals |
Currently, if builders stopped building today, there is less than 4 years, 44 months, worth of homes and developer held lots; if the average monthly sales rate of 166.69 remains constant. Though builders are unlikely to completely stop building it is likely that Snohomish County could see further reduction in the average monthly sales.
A further reduction would also extend the 44 month supply even farther which would further depress the new construction housing market. Another item to note is the 44 month supply does not take into account the vacant lots that are coming up behind the new construction.
Snohomish County Lot Supply Pipeline
| Market Area | ||
| Arlington | ||
| Cathcart | ||
| Everett | ||
| Granite Falls | ||
| Marysville | ||
| Northcreek | ||
| Northwest | ||
| Paine Field | ||
| Sky Valley | ||
| Lake Stevens | ||
| Southwest | ||
| Tulalip | ||
| Totals |
Factoring in the 15,529 lots into the previous supply numbers the numbers is even more staggering. If developers stop purchasing additional lots, and builders just build out the inventory coming up through the pipeline, there is a 11 year supply. Eleven years is a very long time to sit on current inventory and it’s likely that the numbers will change as the market naturally, and governmentally, corrects itself.
In a article in last Sunday’s Everett Herald real estate section titled Snohomish County builders slash home prices, “Todd Britsch, president of real estate research and consulting firm New Home Trends, predicts a Puget Sound housing shortage by 2012 and double-digit appreciation the following year”. A shortage? How can that be possible when there is so much supply to be absorbed right now?
As the new construction housing market slows, to unprecedented levels, jobs will be lost all across the board. Then when the market starts to turn around it will take time to get production levels back up to capacity to meet the new demand, hence a shortage of new construction homes. If Britsch is right, this will be very good news for the resale market because they a buyer’s alternative to new construction homes.
3 Comments
Toby, nice article; hopefully with the election just around the corner things will turn around soon. It is true that the downturn has more to do with than just the election but historically the ecomy slows down in an election year. Also if Boeing decides to go back to work we may see another little boost in the market. Thanks for the article. John Wahl
In Washington D.C., Maryland and Virginia we have the exact same situation. We have a huge amount of inventory on the market and we have a number of new home construction foreclosure auctions! All of the distressed sales are having a negative effect on the market. I am looking forward to this changing! Thanks for the article.
Prabhjit Singh
Glad you enjoyed it Prabhjit. We are also seeing the destressed properties negatively affecting the market but haven’t see to many new construction properties go back to the bank, lots on the hand we have.