In his recent update to HBA members, Joe Zanola of Zanola Company, emphasized the importance of interpreting housing statistics in the context of employment and demographic data for the area. For the entire six-county area, the data shows a slight but consistent uptick in single-family new home permit numbers. That seems to mirror a slow but steady improvement in employment, as well. (To download highlighted slides from the presentation, click here.)
One very bright spot among the charts and graphs Zanola shared was Greene County’s “Historical New Home Inventory vs. Project Demand” chart. This basically compares the rate of closings to the new home inventory. When the inventory bar is around or just under 20% of closings, it’s a healthy balance for the housing market. In Greene County, the chart shows that balance – and there are several other areas in the six-county region approaching balance, as well. This is a positive sign in terms of resolving some issues on the supply side of the equation.
In general, for most housing markets including ours, the challenge remains on the demand side. There are fewer demand-related factors over which we can exert control. Zanola suggests, however, that achieving a greater understanding about demand side factors such as population growth, demographic trends, and existing home inventory characteristics will help the industry better serve the current and future demand more successfully. It is vitally important that builders tune in to this data and listen to what buyers want and need.
Some of the demographic data that Zanola shared, which will have a significant impact on what kind of housing is needed now and in the future, included more conservative population growth projections. As well, he offered some fascinating data regarding the profile of our current households. For example, in Greene County only 27 percent of households have 1 or more people under 18. In Christian County, that increases to 41 percent. The majority of households in the six-county region, or approximately 70 percent, have no one under 18 years of age in them. It’s one- and two-person households that make up the majority of our population – 64 percent. It’s important for us to analyze how that shapes demand for housing stock.
As Zanola reviewed the “Where to Build?” question, he moved through the “Historical Net Home Inventory (Supply) and Projected 12 Month Demand” charts. These are charts commonly referred to as the “stoplight” charts, that examine inventory and projected demand in specific areas of the six-county region. (High risk dark red areas indicate inventory over 30 percent of annual closings and on the opposite end of the color spectrum, dark green areas indicate inventory under 10 percent of annual closings which signals some opportunity.) Even using a fairly conservative formula for calculating the rate of demand, a 24-month projection shows much more dark green “opportunity” in specific areas. Should other factors precipitate demand, this could certainly expedite that transition to greater opportunity. But, there are still areas of risk because of the existing lot inventories, etc.
The full report can be viewed in person by HBA members at the HBA office and a subscription is also available for purchase. If you wish to review the report, set up an appointment by calling the HBA office at 881-3711.