New Construction Market Segmentations

The new construction market continues to segment itself even further. What does that mean? Well, in simple terms, we currently have three independent markets operating within one. Let’s say low, medium and high. Each of these markets is displaying different indicators. One is soaring, one is stable, and one is stagnant.

Many factors account for this: land costs, material costs, labor costs, selections, lack of resale inventory, rates etc. But one thing is for sure, new construction prices are accelerating at a far faster rate than income levels are increasing, which decreases the size of the potential buyer pool or those who can afford our products. Our industry would be wise to heed our customers’ feedback (indicators) and make necessary adjustments to mid-season inventory releases.

As we move into the summer months, May closed sales were up 22.7% from April and also up 19.4% from May 2017. May pended sales were down from the previous month by 10.8% but up 8.3% from May 2017.

There were 1,265 new construction homes for sale in May, which is down 0.8 % from April and up 13.5% from last year.

The average sale price of a new construction home in May was $323,000, which is down $14,000 from last year at this time. The average price per square foot for the month of May was $190, which is down $6 from last year at this time.

The new construction market had 978 single-family homes for sale in the month of May, compared to 876 homes at this time last year. That’s an increase of 11.2% and works out to 4.8 months of inventory based on closed sales and 4.8 months of inventory based on pended sales.

For single-family homes, the average price in May was $339,000, which is down $7,000 from last year. The average price per square foot for the month of May was $193, compared to $196 per square foot last year at this time.

In the multi-family new construction market, 277 units were for sale in the month of May, compared to 228 homes in March of 2017. That’s an increase of 21.5% and works out to 5 months of inventory based on closed sales and 6.2 months of inventory based on pended sales.

The average sale price of a new construction multi-family unit was $265,000 in May, which is down $11,000 from last year. The average price per square foot for the month of May was $179, compared to $196 per square foot last year at this time.

The top new construction metro markets for single-family homes are: Ankeny, Waukee, Urbandale, Grimes and Bondurant.

The top new construction metro markets for multi-family homes are: Ankeny, Waukee, Norwalk, Johnston and Altoona.

Interest rates are currently in the mid-4s with all indicators suggesting a rise to plus or minus 5% by years’ end. Although rates are still very appealing, historically speaking, each of these bumps will have short-term impacts regarding absorption rates within the market.