Today I will cover the significant change in median asking-prices and inventory declines that's occurred over the last 12 months. This data is updated weekly and you can find it on housingtracker.net.
I was especially interested in these selected metro areas because one of my investments, KB Home (NYSE:KBH), has communities in all of them. The same data would also apply to the other large CA builders: LEN, PHM, and SPF.
What prompted me to compile this data was a brief scan I did through a reliable website for local realtors in the Northern San Francisco Bay called Cleanoffer.com. Unlike Zillow and Trulia, if a home is for sale on Cleanoffer - it's available now. If it's in escrow or sold - it will be labeled as such. Because the SF Bay Area has KB Home's largest concentration of communities, I wanted to measure the level of demand it was experiencing.
I looked for the available inventory of homes for sale in 3 zip codes of a very dense residential area just 25 minutes north of the Golden Gate Bridge in Northern California. The population was around 56,000. Over a 100,000 people pass through there each day on their way to the bridge.
The median price range of SFR homes in this area is between $600K to $1M (this is not considered extravagant for the SF Bay Area). I searched for an available family home in this price range and with these parameters: 4 bdr, 2 bath, 2000-3000 sq ft.
I came up with only ONE.
Because KBH is the largest CA builder by volume, I looked at its other metro areas to examine the elasticity of housing demand there to see if it was similar. The results were remarkable.
Available Inventory and Asking Prices in KB Metro Areas
Year/year - Median Asking Prices
Los Angeles, CA
Orange Co, CA
San Diego, CA
San Francisco, CA
San Jose, CA
Las Vegas, NV
San Antonio, TX
Cape C & Ft Myers, FL
Many of these locations have gone from worst to first in a year's time and have had a spectacular rise in median asking prices. They are a seller's market now.
Prices are soaring in these areas because demand has overwhelmed the lack of supply. Add to that new housing starts (relative to our population) are at 50 year lows, mortgage rates are the lowest in memory, and multiple bids for homes are now common in constrained geographic areas - the market for new homes is immense.
As so aptly diagrammed by John Chiem in his article, Why Housing Will Surge in the Next 5 Years, new home construction needs to double from this point to 2 million starts annually (and remain at that level for 5 years) in order to keep pace with the historical trends of US housing demand. Based on his projections, we are in the early innings of this recovery, and a doubling of output is on the horizon.
With the demand that appears obviously ahead - I continue to remain steadfastly bullish on housing in general -and KBH in specific -because the demographics of available supply and demand are nowhere in balance. KB Home had the largest percentage rise in average selling prices among peers last quarter and it is likely to continue. The chart above clearly shows why.
Finally, I went to a builder's field office last week and spoke with a couple of sales people from nearby developments in the SF Bay Area. Every week they meet, almost each week the prices go up, and with each new offer the buyers' sense of urgency is intensifying.
Disclosure: I am long KBH, BRP, GFA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.