Finding which markets are booming for new homes
It's been over a decade since the 2008 market crash, in which financial markets lost more than 30% of their value. But as many metropolitan areas regain their strength and construction increases to match demand, the U.S. housing market has neared its highest value ever.
While this may be beneficial to the U.S. economy, people still struggle to afford housing. Considering metropolitan areas like New York and San Francisco are some of the most expensive places to live and millennials favor apartments over single-family homes, how have trends in new construction changed across the country?
To get a better idea of which cities are authorizing building permits for the highest-value homes, apartments and other residences, we explored Building Permits Survey data from the U.S. Census Bureau, analyzing all new residential building permits filed in over 360 metropolitan areas from 1994 to July of 2019. Here's what we discovered:
- Following the market crash, fewer than 600,000 residential building permits were issued in 2009. This marked a 26-year low. By 2018, the housing market trended toward recovery, with about 1.3 million building permits issued for apartments and houses.
- As of July of 2019, the average metropolitan area had issued 1,843 residential building permits since the start of the year. In Houston-The Woodlands-Sugar Land, Texas, 36,073 permits were issued (nearly 20 times the national average).
- The seaside cities of Honolulu, Hawaii; Sebastian-Vero Beach, Florida; and Crestview-Fort Walton Beach-Destin, Florida, saw the greatest increases in the average valuation of new single-family homes between 2018 and 2019. Of course, these changes could influence how much homeowners charge if they choose to rent out their properties.
Keep reading to see how many new homes and apartment buildings may be popping up in your area and how their estimated values compare with nationwide housing trends.
Which regions are building the fastest?
When financial markets headed into a recession in 2007, new construction rates dropped off over the next few years across the United States. The number of building permits issued for new housing construction began to recover in 2012, and while the housing market recently neared its highest value ever, the number of new housing units authorized hasn't come close to the peak reached before the recession.
In 2005, the number of building permits issued for new housing construction reached a high of nearly 2.2 million. After dropping to a low of fewer than 600,000 in 2009, the total reached nearly 1.3 million in 2018.
As of July 2019, there were 773,567 building permits issued for new residential construction nationwide — and it's expected that new construction rates will continue to climb into in 2020.
In the first half of 2019, the South saw the highest number of new housing units authorized with a total of 401,814. Western states were home to 196,610 new residences, while the Midwest and Northeast saw the fewest with 101,245 and 73,898, respectively.
In addition to the Northeast having the fewest new housing units constructed, the average estimated value of each home was just $173,400 — the lowest of all regions. On the flip side, the West had the highest estimated home value, with an average of $230,300 per unit. Often, the value of a home can be different from the final listing price; there can be much more variation in the listed sale price than a home's appraised value.
Overall, new home construction in each region did not correspond to the percentage of the population that lived there. For instance, although the South is home to just 38.1% of Americans, 51.9% of all building permits were for Southern residences. Similarly, 23.8% of Americans live in the West, but 25.4% of all new residential construction was planned for that region. This may signify population growth in these areas. In fact, between 2017 and 2018, the South and West had the fastest-growing cities nationwide, while numerous cities in the West were named some of the best places to find a job in 2019.
Most valuable new homes
While new homes aren't being built at equal rates across the country, cities with lower construction rates may just be building more expensive homes. The Urban Honolulu, Hawaii, metropolitan area, for example, had the highest value per new construction in 2019, with the average value of a single-family home reaching $396,800. Numerous cities in Florida and California also saw high estimated values, the highest of which averaged over $391,000 per single-family home.
Brownsville-Harlingen, Texas, was the metropolitan area with the lowest value per new construction in 2019. With an average estimated value of a single-family home totaling just $103,000, its nearest competition was Jacksonville, North Carolina, where the average value of new construction was $141,200. Brownsville and Harlingen were not the only Texas cities with low construction value. Laredo, Midland, Corpus Christi, Killeen, Temple and Houston also made the list — to name a few.
Houses in Texas have become so cheap, in fact, that for the price of one home in California, people can buy six in Texas. The inexpensive housing market may also be at the root of an influx of millennials — between 2014 and 2019, around 15,000 young adults moved to Houston per year, with Dallas and Austin also among the top five millennial destinations.
Not only did Honolulu have the most highly valued new single-family homes, but it also saw the largest increase in values in recent months. Between 2018 and 2019, the average value per newly constructed home in Honolulu increased by 69%.
On the other end of the spectrum, five cities in Texas saw the greatest decreases in average estimated value per newly constructed single-family home. There was a 66.1% decrease in value per new single-family home between 2018 and 2019, followed by a 55.1% decrease in the Dallas-Fort Worth-Arlington area. Unlike Honolulu's increasing population of billionaires, pricey neighborhoods in Texas have seen a drop in sales, which could lead builders across the state to construct affordable homes — and more of them. These changes aren't reflective of cities' entire housing markets, but they could indicate increases in the construction of lower-value or even smaller-sized housing units.
Booming cities for construction
While certain Texas cities saw declines in the value of new construction, there seemed to be no slowing down for the number of new homes constructed in some regions of the Lone Star State. The Houston metropolitan area is becoming a construction boomtown — as of July 2019, more than 36,000 building permits were issued for new residential units, the most of any metropolitan area in the country.
The Dallas-Fort Worth-Arlington area wasn't too far behind, with 34,523 building permits issued as of July 2019. These metropolitan areas are likely seeing construction increase due to a spike in job growth. Between August of 2018 and August of 2019, the Dallas-Fort Worth-Arlington metropolitan area saw a 3.1% increase in employment — more than twice the national rate of 1.4%.
When comparing residential growth to the population, the Raleigh-Cary metropolitan area had the most residential properties breaking ground. The population in this metropolitan area has recently skyrocketed, increasing by 39% more residents in less than five years. Next was The Villages, a retirement community near Orlando, Florida, whose resident base is growing at a faster rate than anywhere else in the country.
Out with the old, in with the new
While the latest figures for 2019 make it difficult to predict how the rest of the year will pan out, looking at years prior may indicate which cities will continue to see the most growth.
Santa Rosa, California; Lawrence, Kansas; and Norwich-New London, Connecticut, were the areas with the greatest increase in new construction, each seeing more than a 125% increase.
Columbia, Missouri, on the other hand, saw the most significant decline, with new construction dropping by 65.9% between 2017 and 2018. Florence-Muscle Shoals, Alabama, also saw a massive decrease of more than 56%. While the decline in new housing in Alabama is likely due, in part, to a shrinking population, Columbia's drop in construction is more likely due to the costly price of building and the lack of skilled labor professionals.
Finding your home sweet home
Markets flush with low-cost housing can be alluring to renters who benefit from a high supply of available properties. And with the average renter committing more than 25% of his or her income to housing alone, deciding where to live is an important one.
Looking to start a search for rental properties in one of these growing cities, such as Houston or Raleigh? Apartment Guide is here to help you find the best rentals in your ideal area. To get searching for the most high-quality results, visit us online today.
We analyzed data from the Building Permits Survey, conducted by the U.S. Census Bureau. We accessed the data in August of 2019. This is a monthly and annual mail survey of building permit offices in metropolitan statistical areas (MSA) across the country. The United States Office of Management and Budget delineates metropolitan areas in the U.S. Some locations are specifically requested to report monthly, as noted.
When a report is not received, missing residential data are either (1) obtained from the Survey of Use of Permits (SUP) or (2) imputed. All other missing data are imputed. For more information on how imputations are calculated, a detailed methodology from the U.S. Census Bureau is available here.
Except for 2019 year-to-date data, we used annual statistics, which are an accumulation of data from each MSA. The 2010 YTD information comes from the July 2019 monthly report.
For our analysis, we only included MSAs that had 200, 500 or more new residential units constructed, as noted on the visualizations.
To determine the average value of new construction, we divided the total value of all new residential construction by the total number of new residential units. This does not include the values or numbers of existing houses and may not align with the values of existing homes in a given area. The valuation reflects the estimated value of the residential structure, as shown on the building permit. If no value was listed on the permit, the U.S. Census Bureau accepted estimates from the permit official.
To determine the number of new residences per 10,000 residents, we used the latest available population estimates from the U.S. Census Bureau. Some metropolitan areas in this data were classified slightly differently from the building permit data set. We compared the population of Austin-Round Rock, TX to the number of building permits issued in Austin-Round Rock-Georgetown, TX.
Data could have been affected by errors or limitations on the part of those who responded to the survey, such as an inability to gather information about every case or errors in data processing by those who collected the data. To read the full limitations of this information, please visit the U.S. Census Bureau website.
Fair Use Statement
Finding the perfect mix of location and affordability can be difficult for renters and homebuyers. That's why it's critical to be aware of housing value and construction trends. If you know someone in search of a new place to call home, feel free to share our findings for noncommercial purposes. Just don't forget to link back to this page so that readers get all the information and the authors receive proper credit.