Delaware housing starts post mixed performance

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Delaware posted a weaker performance than adjacent areas in a recent report on new housing starts and closings.

MetroStudy reported  annual starts up 3.7 percent over the second quarter of last year, but saw annual closings in the second quarter down five-tenths of one percent over the same time last year.

The report noted that the  Delaware market has become increasingly competitive on the new construction side.

According to the report, the resale market has started to see a shrinking inventory accompanied by price growth. Still, older homes remained competitive in price when compared to newly constructed homes in the market.

The northern Delaware housing market was slow to recover from the recession of 2009 as the area saw cutbacks at AstraZeneca and DuPont, as well as the closing of the state’s two auto plants.

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The report noted that despite the headwinds,  Delaware’s population grew  7.1 percent from 2010 to 2017, according to census data.

By contrast, new home starts in the Philadelphia region – including South Jersey and the entire state of Delaware rose  25.1 percent. Second quarter closings rose by  26.8 percent. Annual Starts were up 5 percent  Annual Closings rose by  5.7 percent.

A tight supply of lots in the region is holding back the volume of activity in this housing market with prices continuing to rise, leading to concerns about affordability.

“Supply issues have been the narrative as we get closer to the end of this housing story and the volume of activity is held back due to lack of supply,” said Quita Syhapanya, director of Metrostudy’s Philadelphia market. “With over 11,000 in annual starts and 10,000 in closings, this region is experiencing a nice streak of positive activity, which is only strengthened by the fact that it’s operating on a tight supply of lots.”

Syhapanya sai the  decline in closings for the state of Delaware in new home construction  came as a result f construction times getting onger for homes, due at least in part to labor constraints in the overall market.

Syhapanya also reported that the state is undersupplied when it comes to finished lots with curb and gutter work. 

“The market is heavily undersupplied in prime locations close to the beaches in Sussex County as well as Middletown  in New Castle County (22.2 months of supply), and Townsend (10.5 months of supply),” Syhapanya said.  

Syhapanya noted that lots in prime price points between $200,00 to $300,000  have 25 months of supply. In moving up to  $300,000 to $400,000,  inventory shrinks to 21 months.

“With the limited supply of lots the price of a base floor plan new home construction home has risen by 5.6 pecent year on year ending in the second quarter of 2018  at $348,181,” Syhapanya said.

Syhapanya continued, “Now with material cost rising and the tariff war ahead there is no relief in sight and affordability is a concern. Demand for housing is strong and the urgency from buyers who see the interest rates start to rise are feeling the pressure, but the only problem is there is no inventory at the price points that are affordable.”

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