New home construction is recovering slowly on a national level, but in some real estate markets – particularly in large metro areas across the country – residential buildings are going up at a much faster pace than the historical norm.
The local construction boom this year is happening in large, dense real estate markets such as Boston, New York City and San Francisco, where the majority of new homes being built are multi-unit buildings. These are aimed mainly at renters, according to a new study by real estate website Trulia.
“Rentals are an unusually high share of new construction in 2014, as the housing recovery is now creating more new renters than first-time homebuyers,” said Trulia chief economist Jed Kolko in the release.
Confidence among U.S. homebuilders for newly built single-family homes rose in August and reached its highest level since January, according to the National Association of Home Builders/Wells Fargo Housing Market index.
To help identify markets where annualized permit activity is highest compared to the metro areas’ historical norm, Trulia studied Census Bureau building permit data for the first half of 2014. For specific markets, it compared the data with the metros’ historical annual average level of building permits from 1999 to 2013.
Here are the top 10 metro areas where new construction is highest above normal – and the 2014 annualized permit activity relative to these areas’ historical norm:
- Boston: 73 percent
- New York: 70 percent
- San Jose, Calif.: 69 percent
- Houston, Texas: 61 percent
- Oklahoma City, Okla.: 42 percent
- Orange County, Calif.: 40 percent
- Austin, Texas: 39 percent
- Dallas, Texas: 36 percent
- San Francisco: 36 percent
- Los Angeles: 34 percent
Multi-unit buildings account for most of the new construction in 7 of these 10 metros, and more than 80 percent of new units in New York and in San Francisco.
Additionally, construction booms tend to go along with small price gains. “Price increases aren’t especially high, with asking home prices up less than the national average of 7.8 percent in five of those 10 metros,” said Kolko.
However, in Austin, Houston, San Francisco and San Jose, construction booms have gone hand-in-hand with strong price gains.
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