Last week’s recap of 2014’s existing home sales only told part of the story. This week we turn our attention to the harder to track, but vitally important new construction market. As a proxy for new construction starts I have compiled the statistics for lot sales from the Greater Louisville Association of Realtors MLS with particular emphasis on those premium lot sales above $100,000. At this price point, we can assume that the total investment by the buyer will be in excess of $400,000 keeping the comparison in line with the previous report.
The overall lot market for 2014 is up 23% through September, a very healthy increase, driven largely by gains in the very high and low ends of the market (see graph below). Lot sales above $100,000 averaged an 8.4% increase; a very respectable performance given a 12% decrease in available inventory.
One factor driving lot sales has been the decrease in the number of homes available for sale in certain areas. The reduced listing inventory has dramatically narrowed available options for buyers and left many considering new construction that just a few years ago wouldn’t have thought of it. The lack of speculative starts over the past 5 years, particularly in the high-end, has contributed to this inventory shortage leaving a huge gap in Louisville’s East-end housing market. With builders unable or unwilling to finance high-end spec homes since the downturn, buyers are left with fewer options for new or recent construction.
The purchase of new lots only reflects a portion of the new construction activity since many purchased lots years ago and have waited to begin construction until the market for their existing home recovered. We have also seen a resurgence in the number of residential building permits issued by Jefferson County. New single-family construction permits for 2014 were up 112% through September with permits for high-end homes up 81%! Theresidential developments listed by Lenihan Sotheby’s International Realtyhave also seen tremendous activity in 2014 necessitating development of new sections to keep up with buyer demand. All in all, we are beginning to see a healthy new construction market take hold in Louisville as buyers, builders, developers and lenders regain confidence in the market and each other.