March 2017

Research Brief

New-Home Sales Building Momentumt

Wage growth, rising consumer confidence and a pickup in entry-level buying contributed to a 12.8 percent annual gain in new-home sales in February. Purchases of lower-priced properties drove the overall increase, signaling the gradual return of first- time homebuyers. Demand exists for affordable product; however, increasingly high labor and land costs make entry-level home development dif cult to pencil out in many major metros.

Healthy housing demand coupled with limited for-sale inventory drove the median sales price of existing homes up by 7.7 percent over the last year through February, the strongest gain in 13 months. Aggressive price appreciation and a shortage of affordable listings have restrained sales activity. Rising prices will act as a barrier to homeownership, keeping many households in rentals and sustaining underlying apartment demand.

Some highlights from the report:

  • 3,300 new units will be competed in 2017
  • Record supply additions raising vacancy rate to 3.5% in 2017
  • Demand will drive up the average effective rent to $2,190/mo

We'll also take a deeper look at Oakland metro sales trends, investment trends and an analysis of submarkets. We conclude with some thoughts on what to look for in the capital markets from William Hughes, Senior Vice President, Marcus & Millichap Capital.