United States housing has been unexpectedly rising at the fastest pace seen in 16 years. Over the past few months, construction has reached over 1.79 million paces on multifamily projects alone. New U.S. home construction has been boosted by these multifamily projects as builders seek to replenish housing inventory. In February, new-home construction starts jumped 6.8%, which is the fastest growth rate we have seen in the building sector since 2006. Even just compared to last year, housing completions have also gone up 2.8%, and new housing construction with five units or more has jumped 37.3%. The future of construction promises to keep the momentum, as applications to build have climbed to an annualized 1.87 million units. Builders believe that demand from buyers will continue as permanent remote work policies allow more people to move around.
Newly built homes have taken up an increasing portion of the U.S. housing inventory throughout the past 10 years, with a major gain in momentum in mid-2020 after the pandemic began. Builders have been struggling to make up for the lack of existing homes on the market and keep up with the growing demand. This surge in homebuyer demand stems from low mortgage rates and an increase in remote work. Meanwhile, some homeowners have decided to refinance or remodel their homes as opposed to selling, which has intensified the shortage of existing homes for sale. In fact, the overall inventory fell to a record low in December of 2021, hitting 14.2% year over year and 1.8 months of supply. On the other hand, there were 6 months of supply for new homes and inventory was up 34.8%.
Redfin Economist Sheharyar Bokhari shared his thoughts: “A lot of pre-owned homes are being listed, but they are just selling off so quickly- typically in a matter of days- while new homes take longer to sell. So as a homebuyer, you’re increasingly likely to see new builds when you look up homes for sale in your target area. Existing homes tend to be less expensive and fly off the shelves faster, so people who are just getting into the market should speak to their lender and agent about preparing to act quickly when an existing home that meets their criteria does hit the market in winter.”
U.S. homebuilders are currently producing more units for sale than they have in the past 16 years, and housing market experts are saying that the most recent data is not something to celebrate. Even though new-home construction is up 10% as compared to last year’s pace, the rise is not likely to help homebuyers- especially those looking to purchase a single-family home. As mentioned before, the jump in new-home construction was largely driven by a rise in multifamily units, which jumped to 28.1% in March. Meanwhile, single-family projects have actually seen a decline of 4.4% over the past year. The future pace of residential construction is not promising for single-family units either, with building permits seeing a 4.8% decline this spring.
According to the U.S. Census Bureau’s May 2022 report, single-family building permits were at a rate of 1,823,000 which is 5.5% below April’s figure. However, in an updated 2022 housing market forecast from realtor.com, it was found that home prices are anticipated to stabilize as demand cools down and supply increases. Low unemployment rates and wage growth could lead to competition for employees that may make it easier for people to find more flexible job opportunities in which they are able to relocate or work remotely from a more affordable housing market.