Metros within the Sun Belt dominate in new home construction.
Sun Belt Metros Seeing Building Permits Jump in Q1 2022
Redfin reported that 49 of the 53 metros with more than 1M residents issued more single-family building permits per capita during Q1 2022 than were issued during the 10 years (2010-2019) that immediately preceded the COVID pandemic.
38 of the 53 metros with more than 1M residents issued more multi-family building permits during Q1 2022 than during the 10 years preceding the pandemic.
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Researching single-family permits (defined here as buildings with 1-4 housing units) during Q1 2022, Redfin found the metros listed below as those leading the way in terms of new home building:
- Austin TX – 31.1 single-family building permits per 10K people
- Raleigh NC – 30.7 permits/10,000 people
- Jacksonville FL – 29.2 permits/10K people
- Nashville TN – 26.6 permits/10K people
- Charlotte NC – 22.9 permits/10K people
- Phoenix – 22.7 permits/10K people
- Houston TX – 22.4 permits/10K people
- Orlando FL – 20.3 permits/10K people
- Dallas TX – 18.5 permits/10K people
- Las Vegas NV – 17.2 permits/10K people
Redfin also listed the top ten metros with the most multifamily (defined here as buildings with 5+ housing units) building permits per 10,000 people during Q1 2022. These metros, split between Sun Belt and northern metros, included:
- Austin TX – 26.2 multifamily permits per 10,000 people
- Jacksonville FL – 19.9 permits/20K people
- Salt Lake City UT – 16.7 permits/10K people
- Orlando FL – 12.7 permits/10K people
- Denver CO – 12.6 permits/10K people
- Seattle WA – 11.9 permits/10K people
- San Antonio TX – 11.5 permits/10K people
- Richmond VA – 11.5 permits/10K people
- Minneapolis MN – 11.1 permits/10K people
- Charlotte NC – 11 permits/10K people
Building More Homes = One of Ways to Ease Affordability Challenges
According to Daryl Fairweather, Chief Economist with Redfin, “If there had been enough homes at the start of the pandemic, housing costs might not have skyrocketed the way they did over the past two years. The government should support homebuilding with things like subsidies and up-zoning even as demand pulls back so the housing-supply hole starts to fill in. There still aren’t enough homes to meet the pace of household creation, and we need to be more prepared when demand inevitably picks back up.”
That said by Fairweather, affordability is rapidly evaporating. All the metros with the most building permits in Q1 2022 have seen their respective sales prices increase +15.5% y/y more than the national average. Sales prices in Las Vegas jumped 29% during April 2022 and sale prices in Nashville, Orlando, Raleigh and Phoenix all rose at least +25%.
“Rapidly rising home prices in the Sun Belt highlights the need for more homes,” said Redfin Deputy Chief Economist Taylor Marr. “The hope for buyers is that building new homes will tame price growth so that housing remains more affordable than pricey coastal areas, especially with mortgage rates higher than they have been in recent years. I may become even more important to build if higher rates continue to drive out-of-town buyers to the Sun Belt.”
Prices of New Homes More Expensive
Currently, according to Fairweather, “…the US is roughly 4M houses short of meeting homebuyer and renter demand.”
Prices of new homes and rents mirror this housing shortage. Nationwide, the typical newly built home sold for $470,000 during Q1 2022, an increase of +19.2% y/y. (The typical existing home sold for $403,000, +16.7% y/y.) Plus, individual buyers are increasingly competing for those newly built homes with investors as more than 25% of new construction was acquired by investors during Q4 2021, an increase of +3% from two years prior.
Outsized price growth is simultaneously happening in five of the six top metros with the most multifamily building permits per capita. Rent prices in Austin, Jacksonville, Orlando, Denver and Seattle all saw asking rents jump over +15% of the national average with Austin’s rents soaring to +46% y/y.
Only three metros saw their respective asking rents fall in April 2022: Minneapolis rents fell -2%, Milwaukee rent prices dropped -8% and Kansas City rents decreased -4%.
“Minneapolis is an apt example of how housing options and rental affordability improve when local governments change (housing) policies,” said Marr. “Minneapolis abolished single-family zoning in 2018, paving the way for more multifamily rentals, and that’s translating to lower rents. Building more rentals could have a similar effect in places like Austin and Seattle, where it’s becoming difficult for the average renter to afford monthly housing costs without making sacrifices in other parts of life.”
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Thanks to Redfin.