Wednesday, December 7, 2022

UT building homes at fastest growth rate in U.S.

Rising real estate values and increasing rents have stretched budgets for homebuyers and renters over the last two years. The median home sales price in the U.S. jumped by nearly $100,000 from the first quarter of 2020 to the first quarter of 2022 amid low interest rates and a stronger-than-expected pandemic economy. Rents were flat for much of 2020 with COVID-related renter protections and rental assistance programs in place but accelerated in 2021 and the first half of 2022. Median rent in the U.S. has increased by more than 15% over the past year and recently passed $2,000 per month for the first time.

Since the beginning of 2022, the U.S. Federal Reserve has raised interest rates in efforts to combat inflation throughout the economy. Between rising mortgage rates and the rapid run-up in home values, the residential real estate market has shown recent signs of cooling. But while a leveling out in demand could slow the pace of price increases, these measures cannot solve another fundamental challenge in the U.S. housing market: a major shortage of housing supply.

Researchers at federal mortgage backer Freddie Mac have estimated that the U.S. has a housing supply shortage of 3.8 million units. This shortage has been fueled in large part by a decline in single family home construction, particularly for starter homes, dating back to the 1980s. And with millennials now comprising the largest generational segment of the homebuying market, a lack of affordable entry-level homes has driven competition for housing and kept larger numbers of young adults renting, contributing to price increases for buyers and renters alike.

The lack of housing supply has been exacerbated by significant underinvestment in new housing since the last recession. New housing authorizations tend to fall temporarily during economic downturns, but the collapse of the housing market in the mid-2000s and ensuing Great Recession sent annual housing authorizations to historic lows. New housing permits have recovered slowly over the last decade, only recently surpassing historic averages.

Despite recent demand and a clear need for new housing supply, the construction industry has struggled to keep up during the pandemic. COVID-related disruptions have produced worker shortages and hindered supply chains, making it harder and more expensive to obtain building materials. As a result, more single-family units are seeing monthslong delays in the time it takes to start and complete construction when compared to years past.

Although supply is a challenge across the U.S., some locations are moving faster than others in authorizing new construction. Fast-growing states in the Mountain West, like Utah, Idaho, and Colorado, along with Sun Belt destinations like Texas and Florida, lead the U.S. in the rate of new housing authorizations relative to existing homes. At the local level, major cities in these fast-growing states are also among the leading metros for new home construction.

To determine the states building the most homes, researchers at Inspection Support Network analyzed the latest data from the U.S. Census Bureau and Zillow. The researchers ranked states according to the number of new housing units authorized per 1,000 existing homes in 2021. In the event of a tie, the state with higher total new housing units authorized in 2021 was ranked higher.

The analysis found that for every 1,000 existing homes in Utah in 2021, 35.2 new housing units were authorized, compared to 12.5 new units nationally. Out of all states, Utah is building homes at the fastest growth rate. Here is a summary of the data for Utah:

  • New housing units authorized per 1k existing homes (2021): 35.2
  • New housing units authorized per 1k existing homes (2019): 27.0
  • Total new housing units authorized (2021): 39,058
  • Total new housing units authorized (2019): 28,779
  • Percentage change in housing units authorized (2019–2021): +35.7%
  • Median home price: $567,714

For reference, here are the statistics for the entire United States:

  • New housing units authorized per 1k existing homes (2021): 12.5
  • New housing units authorized per 1k existing homes (2019): 10.2
  • Total new housing units authorized (2021): 1,736,982
  • Total new housing units authorized (2019): 1,386,048
  • Percentage change in housing units authorized (2019–2021): +25.3%
  • Median home price: $344,141

For more information, a detailed methodology, and complete results, you can find the original report on Inspection Support Network’s website: https://www.inspectionsupport.com/resources/cities-building-the-most-homes

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