Builders Look to Fill Supply Void Left by Declining Foreclosures

RealtyTrac has undertaken a new type of analysis, comparing building permit data from the Department of Housing and Urban Development (HUD) with foreclosure starts for the same time period at the national, state, and city level. It appears that the company is seeking to pinpoint areas where either increased building, increased foreclosures, or both will increase inventories which are at historically low levels in some localities.

RealtyTrac reports the following.

Building permits were issued in the first quarter at a rate that was 27 percent higher than one year earlier and was the highest first quarter number issued since 2008.  Foreclosure starts nationwide decreased by 27 percent on an annual basis to the lowest quarterly level since 2006.   Sixty-four percent of the building permits were for single family residences and 33 percent were for units in buildings of five units or more (multi-family buildings) and permitting for those multi-family units were up 23 percent from a year earlier. 

Texas, Florida, North Carolina, California, and Georgia issued the most single family permits in the first quarter and all five states also had fewer foreclosure starts than a year earlier although starts were down only 1 percent in Florida.  In Nevada, Washington, New Jersey, Maryland, and New York both foreclosure starts and single family permits increased from a year earlier.

On a metropolitan area level the largest number of single family building permits were issued in Houston, Oklahoma City, Austin, El Paso and Fort Worth and of these all but Austin saw a decrease in foreclosure starts.  Austin had a 19 percent increase.  

All five cities with the most foreclosure starts in the fourth quarter also posted increases in single family building permits.  These cities were Miami, Las Vegas, Chicago, Fort Lauderdale and Orlando.  Three of the cities, Las Vegas, Fort Lauderdale and Orlando had year-over-year increases in foreclosure starts. 

Cities where both single family building permits and foreclosure starts increased at least 10 percent from a year ago included Las Vegas, Seattle, Raleigh, Reno, and Boca Raton.   Both single family permits and foreclosure starts decreased in San Antonio, Albuquerque, Fresno, Bakersfield and Greensboro, N.C.

"Nationwide and in most markets it appears builders are planning to ramp up activity that will help offset a drop in foreclosure starts, but there are some markets where a jump in both building permits and foreclosure starts in the first quarter indicate the scales will tip more heavily in favor of supply of homes for sale in the coming months - both new homes and foreclosures," said Daren Blomquist, vice president at RealtyTrac. "On the other extreme there are some markets where both building permits and foreclosure starts are down dramatically, indicating that there will be no reprieve from the shortage of homes for sale in those markets in the near future."

RealtyTrac said it used permit data from HUD rather than the Census Bureau because the latter does not include concurrent year revisions to preliminary monthly data.