Many house hunters can attest to the lack of affordable housing options across the country. Fortunately, home builders are responding by ramping up residential construction, creating a new wave of inventory to ease the market’s ever-present tension. Housing starts boosted on a national level this summer, but no two home building markets are exactly alike. And, the reasons for growth vary considerably from place to place.
Trulia recently analyzed census building permit data to not only determine how many new homes will be built in 2017, but how that activity compares to each city’s respective historical average. Comparing a metro’s building activity to its own chronological trend creates a fair baseline to exclude markets building the most solely due to their scope. Plus, metros building more than their historical average are likely doing so because of optimistic economic indicators including strong job growth, rising wages and soaring home values.
For 2017, the following metros rank highest in home building activity compared to their individual annual construction permit averages between 1980 and 2016:
Now, consider how the largest home building markets of 2017 fare in terms of relative construction expansion versus decline.
#1 in Home Building Markets: Dallas
Everything is bigger in Texas – including the new construction market. Dallas is on pace to build 48,772 new homes this year alone, the most of any major metro in the nation. That’s 61 percent more than Dallas’ historical norm of 30,298 residential construction permits per year, placing Dallas in sixth place for relative improvement. Aside from sheer size, other factors that likely assisted Dallas’ building boom include over 18 percent employment growth, 11 percent in income growth and a 53 percent home value increase between 2010 and 2016.
Houston comes in a close second for home building activity with 47,946 projected permits for the year. Houston home building is up 27.8 percent relative to the metro’s average of 37,515 permits per year. Although Houston does not rank as a top 10 market in individual growth, local economic factors are nonetheless strong. Over the past six years, Houston saw employment rise 17 percent while income jumped nearly 11 percent. Home values also rose roughly 20 percent during the same period.
#3: New York
As the largest city in the U.S. by population, it’s no surprise that New York City builders are attempting to keep pace with local home buyer demand. The Big Apple is set to build 40,006 new homes this year – 27.2 percent more than the city’s annual average of 31,462 permits. Since 2010, employment growth in NYC was slightly above 13 percent while income growth reached 6.5 percent. Home values climbed just 16 percent concurrently.
Although Atlanta holds 34,382 permits and places no. 5 among markets on pace to build the most this year, construction activity is down 17.5 percent compared to historical average. On average, Atlanta sees 41,653 home building permits per year. Despite the drop, Atlanta displayed 15 percent and 8 percent in employment and income growth, respectively. Even more impressive is the metro’s 5-year home value appreciation of nearly 41 percent since the recession.
Austin comes in fifth place for home building with 29,872 new homes in 2017. Austin is not only one of the biggest home building markets, but leads the pack in terms of relative development. Home construction activity in Austin is 107.7 higher than its historical average (14,379 permits per year). Perhaps the biggest motivator is Austin’s 22 percent employment growth – the third best in the U.S. Austin also ranked fourth in the nation for income growth (21 percent) and 35th for home value growth (29.7 percent).
For comparison, Dallas, Houston and Austin are on pace to build 130,000 new homes collectively. These three Lone Star State powerhouses hold over 10 percent of all permits in the U.S. and will build almost as many new homes as 50 other large U.S. metros combined.
Home building is the single best predictor of home inventory in the U.S., mostly because new construction has a ripple effect on the real estate market. There are new homes, but existing resale inventory also increases when new construction buyers sell their previous residences, and so on. Essentially, even buyers who aren’t in the market for new construction are still impacted by home building activity.
Written by Jennifer Riner on behalf of Trulia.