Household formations outpaced single-family
home construction by 7.2 million homes in 2023; including
multi-family home construction reduces the gap to 2.5 million
homes
SANTA
CLARA, Calif., Feb. 27,
2024 /PRNewswire/ -- While the number of homes for
sale has been recovering from pandemic-era lows thanks to a surge
of new construction, a new Realtor.com® analysis
found that the market is still missing up to 7.2 million homes, the
result of more than a decade of underbuilding relative to
population growth.
"The U.S. is in a long-term housing shortage with the
construction of new homes failing to keep pace with a growing
population. While a recent uptick in new construction has the
potential to alleviate the historically low level of homes for sale
on the market today, it's going to take some time to close the
gap," said Danielle Hale,
Chief Economist at Realtor.com®. "That said, the
elevated level of both single- and multi-family construction coming
to market this year is likely to put downward pressure on rent
prices in many markets, welcome news for renters. It also means
that the higher than usual share of new homes for sale is likely to
continue, giving home shoppers willing to consider new homes more
options."
Household formation outpaces single-family home construction,
despite uptick
In 2023, an additional 1.7 million
households formed, resulting in a total of 17.2 million new
households between 2012 and 2023. Homebuilders started construction
on 947,200 single-family homes and 472,700 multi-family homes in
2023, bringing the 2012 to 2023 overall housing starts total to
14.7 million homes, roughly 10 million of which were single-family.
The gap between single-family housing starts and household
formations grew from 6.5 million at the end of 2022 to 7.2 million
at the end of 2023 as household formations remained steady and
single-family home construction waned. Though the gap widened, it
was the third smallest single-year gap between households and
housing starts since 2016.
As household formations outpaced housing starts in 2023, the
overall gap between household formations and total housing starts,
including single- and multi-family homes, widened from 2.3 million
housing units between 2012 and 2022 to 2.5 million units at the end
of 2023.
Affordable new for-sale inventory starts to recover, sunbelt
metros grow faster
In 2022, just 38% of new homes were sold
for less than $400,000, however, in
2023, this share increased to 43%, indicating a shift toward more
affordability in the new construction space. Many builders offered
price cuts and other incentives in 2023 to prompt home sales and
also focused on smaller units, which likely led to this progress in
affordability.
At the metro-level, some areas have seen outsized household
growth relative to permitting activity. Looking at just the gap
between single-family permits and household formations reveals that
permitting activity has lagged household growth in 73 of the top
100 metros in the U.S. The metros with the largest single-family
gap include San
Antonio-New Braunfels,
Texas; Austin-Round Rock,
Texas; and Deltona-Daytona Beach-Ormond
Beach, Fla. The top 10 list of metros by size of gap
relative to population includes three Texas metros, five Florida metros, and two Washington metros. Many of these areas have
seen significant population growth because of their affordable cost
of living and overall desirability.
Who are today's new construction buyers?
Realtor.com® is also releasing a New Construction
Consumer Report today, a survey of recent new home buyers that
looked into their motivations and buying behaviors. According to
that report, the typical new construction buyer today skews
younger, wealthier and more pet friendly compared to non-new home
buyers. While new construction buyers were previously more likely
to be Boomers, today it's Millennials; among respondents who bought
new construction in the past 12 months, nearly half (48%) were
Millennials. Despite skewing younger, most surveyed new
construction buyers are experienced home purchasers, and 75% had
previously owned a home. New home buyers are also more likely to be
higher income earners, with more making between $100,000–200,000 versus non-new home buyers (30%
compared to 22%).
Newness, customizability and location top draws for new home
buyers
When it comes to the appeal of new homes, buyers
purchased first for its newness, followed by customizability and
resale value. Price is a top concern for new home shoppers, but
location matters most; 28% of new construction respondents placed
location above price (24%) as their prime initial consideration
factor. When choosing a builder, their reputation rounded out the
top three most important factors, and mattered to potential buyers
almost as much as price and location. In fact, early half of
surveyed buyers (48%) said they considered a builder's reputation
and ratings as part of their selection criteria, scoring higher
than the ability to customize and the timing/availability of the
home. Repeat customers are top future customers too; 91% of recent
buyers say they'd purchase a new construction home again.
Realtor.com® is helping educate homeshoppers about
the benefits of new construction with a newly launched consumer
campaign at www.realtor.com/newconstructioneducation.
Methodologies
To view the full reports and
methodologies, please visit the U.S. Housing Supply Gap Report and
the New Construction Consumer Report pages.
About
Realtor.com®
Realtor.com® is an open real
estate marketplace built for everyone.
Realtor.com® pioneered the
world of digital real estate more than 25 years ago. Today, through
its website and mobile apps,
Realtor.com® is a trusted
guide for consumers, empowering more people to find their way home
by breaking down barriers, helping them make the right connections,
and creating confidence through expert insights and guidance. For
professionals, Realtor.com® is
a trusted partner for business growth, offering consumer
connections and branding solutions that help them succeed in
today's on-demand world.
Realtor.com® is operated by
News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move,
Inc. For more information, visit
Realtor.com®.
Realtor.com® media contact:
Sara Wiskerchen,
press@realtor.com
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SOURCE Realtor.com