A Decade in Residential Construction: Completed Homes Still on the Rise, but Permits Drop
Rising inflation, prohibitive mortgage rates and banking troubles are the most recent issues afflicting the housing market, with owners and buyers caught in the cross hairs. But what are the bigger construction and transaction trends at play in the home building industry? How have they changed in the last decade and how are they affecting homeowners and homebuyers?
To get a better understanding of the macro-trends in home building, Point2 analyzed historical data on permits, completed and started units, along with employment, incomes, and business data to compile a detailed report on how housing construction and construction employment trends evolved over the past decade. The report is accompanied by an extensive resource page highlighting the Y-o-Y changes in residential construction over the last decade, in all the states and 384 U.S. metros.
Findings show that:
- The number of residential permits issued at the national level more than doubled in 2021 compared to 2012, only to slightly decrease in 2022. The number of housing starts followed the same path;
- In the last decade, an average of 2,971 homes were completed and 3,513 permits were issued every day. The number of completed housing units increased continuously since 2012, reaching 1,391,000 units in 2022;
- Single-family home permits dominate at the national level, with permits issued for 1-unit homes representing the majority;
- Texas, Florida and California are the top three states with the highest number of permits. In fact, together, they represent more than a third of the total number of permits issued in the U.S. in 2022;
- At metro level, Dallas, Houston and New York have the most permits issued in 2022 of all the 384 metros included in the analysis;
- The total number of employees active in the construction industry kept growing for the past decade, along with their average income. New York, Los Angeles and Houston have the highest number of construction employees.
Check out the full set of data and accompanying visuals here: https://www.point2homes.com/news/us-real-estate-news/decade-trends-residential-construction.html
The current housing market is a mixed bag. Both homeowners and potential homebuyers are experiencing decision paralysis, trapped in the financial rollercoaster that is gripping the nation.
With the barrage of news about skyrocketing and plunging home prices, inflation, rising and falling mortgage rates, buyer’s markets and seller’s markets, and the most recent banking debacle, it’s becoming increasingly hard to see the facts and make any decision whatsoever about buying and selling.
In the Last Decade, an Average of 2,971 Homes Were Completed Every Day in the U.S.
- In 2012, a total of close to 830K permits were issued, amounting to a value of $140,5B. By 2022, the number of permits almost doubled, reaching 1,65M, while their value climbed to $374B.
- From 2012 to 2022, an average of 2,971 homes were completed and 3,513 permits were issued on a daily basis.
- In 2014, the total number of permits issued at the national level crossed the 1-million mark and kept increasing until 2022, when the first drop was recorded.
- The drop in total permits recorded in 2022 is almost entirely due to the decrease in permits for single-family homes.
- Although the number of housing starts, like the number of permits dropped in 2022, the number of completed units kept steadily increasing.
Despite a drop in the number of permits issued, 2022 has been a strong year for home building. After being pummeled by the pandemic and its aftermath, home builders have proven just how adaptable and resilient they are.
As such, last year may have been a "stop and take stock" moment, the lower number of permits issued at the national level in 2022 indicating a recalibration of effort and resources.
Further proof that this really is the case is that completed units have continued to increase, despite the slowdown in permits and housing starts, as well as the many supply chain issues and price challenges.
However, this decade-long upward trajectory may start to slow down in light of the most recent banking problems and the lending stress they created. According to Axios, higher interest rates are mainly affecting the commercial real estate sector for now, but the ripples of higher borrowing costs might soon start impacting builders and housing construction as well:
"Meanwhile, it's not just offices at stake. A lending freeze is certain to impact the construction of badly needed apartment units, as scarce supply helps buttress nationwide rent prices, a key source of consumer inflation.
RentCafe found that "overall housing supply can't keep up with demand," especially with over 60% of apartment-dwellers renewing their leases and affordable units tougher to find."
Another significant finding was that the drop in the total number of permits was almost entirely due to the drop in the number of single-family homes permits, while the number of permits for multifamily homes continued to rise. This could mean that rising building costs are forcing developers to focus more on multifamily projects, at the expense of single-family homes and duplexes.
Interestingly, the total value of permits issued for 2- to 4-unit homes actually increased, despite the drop in the number of permits issued. This could suggest that the building costs for this type of housing have indeed been going up, which may make them a more valuable investment in the long run compared to single-family homes or larger multifamily properties.
View the rest of the report and data here at point2homes. Data includes contruction employee data, changes in their average income, as well as construction businesses, along with information about permits issued by state and metro area, as well as other charts and data in their comprehensive report.
Banner Image: Unpacking in a new home. Image Credit - HiveBoxx