The US housing market continues to come up short in the number of single-family properties being created compared to the growing number of households.
New statistics released by Reator.com demonstrate that the US housing market is missing up to 7.2m homes. The number of properties for sale has been recovering from the lows seen during the pandemic largely due to a surge in the construction of new-builds.
However, building levels have been falling short of population growth for more than a decade, so while the gap is closing in the US housing market, there is still demand for more housing, especially in certain locations.
In 2023 alone, an additional 1.7m households formed, which has resulted in a total of 17.2m new households between 2012 and last year.
Builders started construction on 947,200 single-family homes and 472,700 multi-family homes throughout the past year, which brought the 2012 to 2023 overall housing starts total to 14.7m homes with roughly 10m of those single-family units.
US housing supply
Across the US housing market, the gap between starts on new single-family housing and household formations grew from 6.5m at the end of 2022 to 7.2m at the end of last year.
Throughout the past year, household formations remained steady, while single-family home construction waned. Although the gap widened, it’s important to note that this is the third smallest gap between households and housing starts in a single year since 2016.
As household formations outpaced housing starts last year, the overall gap between the two widened from 2.3m units between 2012 and 2022 to 2.5m at the end of 2023.
Danielle Hale, Chief Economist at Realtor.com, says: “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.
“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.”
More affordable inventory
Throughout 2022, only 38% of new homes were sold for less than $400,000. However, last year this increased to 43%. This data suggests a shift towards more affordability in the new-build space.
In 2023, homebuilders offered incentives and price cuts to prompt home sales, according to Realtor.com. Builders also focused on smaller units, which likely led to this increase in affordability.
Some metro areas across the US housing market have recorded outsized household growth relative to permitting activity. Looking at the gap between single-family permits and household formations shows that permitting activity has fallen behind household growth in 73 of the top 100 metros across the country.
The top 10 metros by size of gap relative to population includes three metro areas in Texas, five in Florida and two in Washington. Many of these locations have seen substantial population growth largely due to their affordable cost of living and overall desirability.
The appeal of new-builds
Realtor.com also released their New Construction Consumer Report, which included a survey of recent new home buyers. When it comes to the appeal for new-builds in the US housing market, buyers purchased first for its newness. This was then followed by customisability and resale value.
While price is a top concern for potential new-build buyers, location matters most. And when choosing a homebuilder, reputation was the third most important factor.
It’s important to note that this even mattered almost as much as price and location. These are also similar trends being seen among buyers and investors within the UK’s new-build market.
BuyAssociation is a property investment consultancy that works closely with some of the UK’s top developers, giving domestic and overseas investors access to new-build developments and off-plan opportunities. Get in touch for more information.
