Construction of all home types is on the rise, but the wheels of supply will take time to catch up with demand.
Home construction is picking up across the U.S., according to new data. This will add much-needed supply to the housing market—however, it will take a few years for an equilibrium to be met.
In all, the U.S. is short about 5 million homes, and it’ll take years to catch up. In the meantime, investors scooping up well-maintained resale rentals in growth markets are likely to continue to succeed as new construction tries to keep up. Here are key data points investors should note about the rise in new construction:
The current share of new construction homes on the market is at record levels, with 34.1% of single-family homes for sale in December fitting into that category. This is up from 25.4% a year earlier and is the highest rate on record.
In 2021, 51,000 single-family built-for-rent homes began construction, up 15.9% over 2020.
Over the past 12 months, townhome starts sat at 146,000 units, which is 28% higher than the prior 4 quarters. Further, custom home building jumped 10.8% in 2021.
Finally, sales of new single-family homes in December 2021 reached 811,000, an 11.9% month-over-month gain.
All of this may be the relief the construction industry needs. That said, there are still significant labor and material shortages that will act as headwinds.
As builders look to keep up with demand over the coming years, there may be a saturation of these newer, suburban-type assets hitting the market. Investors should take note and consider well-built resale homes in solid markets, which may be in higher demand as more new supply hits the market.
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