Share of Homes Built in Community Associations Edges Down Again

2023-12-07T10:21:12-06:00

By Ashok Chaluvadi on December 7, 2023 • According to data from the Census Bureau’s Survey of Construction (SOC), 62.6% of single-family homes started in 2022 were built within a community or homeowner’s association.  This marks the second year in a row that the share declined, from the high point of 67.1% posted in 2020, and 65.5% in 2021.  Prior to 2021 the share had been on a decade-long upward trend.  In absolute numbers, a total of 623,096 homes were started in community associations in 2022, compared to 729,109 in 2021. The Census Bureau defines community or homeowner’s associations as “formal legal entities created to maintain common areas of a development and to enforce private deed restrictions; these organizations are usually created when the development is built, and membership is mandatory.” When analyzed by the 9 census divisions, the highest share was in the Mountain Division, where 78.6% of new homes were in such communities. In the New England Division, on the other hand, the share was only 34.5%. In the South Atlantic Division 71.4% of new homes started in 2022 had a community or home owner’s association, followed by the West South-Central Division at 68.6%, and the Pacific 52.4%. In the West North-Central Division, the share was 46.7%, while in the East North-Central Divisions it was 44.3%. In the East South-Central and Middle Atlantic Division 42.3% and 34.8% of new homes started in 2022 were within a community or home owner’s association, respectively. ‹ Two-Story Foyer Trend Sees a Slight Increase in 2022Tags: construction, economics, home building, housing economics, single-family, starts, survey of construction

Share of Homes Built in Community Associations Edges Down Again2023-12-07T10:21:12-06:00

Custom Home Building Share Improves in 2022

2023-11-30T10:19:31-06:00

By Ashok Chaluvadi on November 30, 2023 • According to data from the Census Bureau’s Survey of Construction (SOC), custom homes share increased to 20.4 percent of all single-family homes started in 2022 from the 17.6 percent recorded in 2021. The custom home market consists of contractor-built and owner-built houses—homes built one at a time for owner occupancy on the owner’s land, with either the owner or a builder acting as a general contractor. The alternatives are homes built for sale (on the builder’s land, often in subdivisions, with the intention of selling the house and land in one transaction) and homes built for rent. In 2022, 71.4 percent of the single-family homes started were built for sale, and 5.9 percent were built for rent. While the custom-home percentage increased in 2022, the number of custom homes started in 2022 (207,472) was actually higher than the number of custom homes started in 2021 (199,675). The quarterly published statistics show that the custom-home share of single-family starts declined. Although the quarterly statistics are more timely, they lack the geographic detail available in the annual data set. When analyzed by the 9 census divisions, the annual data show that the highest custom home share in 2022 was 45.4 percent in New England Division. In the South Atlantic Division, on the other hand, the share was only 13.8 percent. In the East South-Central Division, 39.6 percent of new homes started were contractor-built or owner-built houses, followed by the East North-Central Division at 37.9 percent and 34.6 percent in the Middle Atlantic Division. In the West North Central Division 23.4 percent of new homes started where custom homes, followed by 15.6 percent in the West South-Central Division, 18.0 percent in the Pacific Division, and 15.5 percent in the Mountain Division. ‹ Unraveling the Complex Tapestry of Inflation Dynamics: Post-Covid ChangesTags: construction, economics, eye on the economy, Federal Reserve, home building, housing economics, single-family, starts

Custom Home Building Share Improves in 20222023-11-30T10:19:31-06:00

Home Size Trending Lower

2023-11-22T08:19:22-06:00

By Robert Dietz on November 22, 2023 • An expected impact of the virus crisis was a need for more residential space, as people use homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower. According to third quarter 2023 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area came in at 2,221 square feet, close to the lowest reading since the end of 2010. Average (mean) square footage for new single-family homes registered at 2,430 square feet. Since Great Recession lows (and on a one-year moving average basis), the average size of a new single-family home is now more than 2% higher at 2,442 square feet, while the median size is more than 5% higher at 2,216 square feet. Home size rose from 2009 to 2015 as entry-level new construction lost market share. Home size declined between 2016 and 2020 as more starter homes were developed. After a brief increase during the post-covid building boom, home size is trending lower and will likely do so as housing affordability remains constrained. ‹ Existing Home Sales Slide to a New 13-Year Low Amid High Mortgage RatesTags: economics, home building, home size, housing, new home size, single family home size, single-family

Home Size Trending Lower2023-11-22T08:19:22-06:00

Flat Readings for Single-Family Built-for-Rent

2023-11-20T08:24:54-06:00

Single-family built-for-rent construction has cooled as investor interest has pulled back on tighter financial conditions, leading to flat construction conditions after recent gains. According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 17,000 single-family built-for-rent (SFBFR) starts during the third quarter of 2023. This is more than 6% higher than the third quarter of 2022. Over the last four quarters, 70,000 such homes began construction, which is almost a 3% increase compared to the 68,000 estimated SFBFR starts in the four quarter prior to that period. The SFBFR market is a source of inventory amid challenges over housing affordability and downpayment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in terms of structural characteristics compared to other newly-built single-family homes, particularly with respect to home size. However, investor demand for single-family homes, both existing and new, has cooled with higher interest rates. Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (7.8%) is nonetheless higher than the historical average of 2.7% (1992-2012). Importantly, as measured for this analysis, the estimates noted above only include homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another five to seven percent of single-family starts based on industry surveys. Indeed, the Census data notes an elevated share of single-family homes built as condos (non-fee simple), with this share averaging more than 5% over recent quarters. Some, but certainly not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given these units are often built on a single plat of land. However, spot checks by NAHB with permitting offices indicate no evidence of this data issue occurring. Nonetheless, demand by investors for single-family rental units, new and existing, has cooled in recent quarters as financial conditions have tightened. This will act to lower the share of homes sold to investors. With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly expanded. Given affordability challenges in the for-sale market, the SFBFR market will likely retain an elevated market share even as the sector cools. Related ‹ Best Quarter for Townhouse Construction Since 2007Tags: economics, home building, housing, SFBFR, single family built for rent, single-family

Flat Readings for Single-Family Built-for-Rent2023-11-20T08:24:54-06:00

Best Quarter for Townhouse Construction Since 2007

2023-11-17T10:21:35-06:00

By Robert Dietz on November 17, 2023 • Despite weakness for single-family construction in 2023, townhouse construction recorded the best quarter for starts in 16 years. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the third quarter of 2023, single-family attached starts totaled 43,000, which is 16% higher than the third quarter of 2022. This represents an acceleration over the last four quarters, during which townhouse construction starts totaled a solid 148,000 homes, which is 2% lower than the prior four-quarter period (151,000). Using a one-year moving average, the market share of newly-built townhouses stood at 16.5% of all single-family starts for the third quarter. With the recent gains, the four-quarter moving average market share is the highest since 1985. Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6%, on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s. The long-run prospects for townhouse construction remain positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Related ‹ Single-Family Starts Flat in OctoberTags: economics, home building, housing, single-family, townhouse

Best Quarter for Townhouse Construction Since 20072023-11-17T10:21:35-06:00

Single-Family Permits Down in September 2023

2023-11-15T09:18:56-06:00

Over the first nine months of 2023, the total number of single-family permits issued year-to-date (YTD) nationwide reached 693,908. On a year-over-year (YoY) basis, this is 13.3% below the September 2022 level of 800,424. Year-to-date ending in September, single-family permits declined in all four regions. The range of permit decline spanned 10.8% in the Northeast to 19.3% in the West. The South declined by 11.3% and the Midwest declined by 13.3% in single-family permits during this time. For multifamily permits, the percentage decline spanned 11.4% in the South region to 29.9% in the Northeast. The West declined by 15.3% and the Midwest declined by 20.1% in multifamily permits during this time. Between September 2022 YTD and September 2023 YTD, except for Hawaii (+16.9%) and Maryland (+6.4%), all the other states and the District of Columbia reported declines in single-family permits. The range of declines spanned 4.1% in New Hampshire to 49.2% in Alaska. The ten states issuing the highest number of single-family permits combined accounted for 63.9% of the total single-family permits issued. Texas, the state with the highest number of single-family permits issued, declined 14.3% in the past 12 months while the next two highest states, Florida and North Carolina declined by 12.0% and 5.5% respectively. Year-to-date, ending in September, the total number of multifamily permits issued nationwide reached 433,862. This is 16.1% below the September 2022 level of 516,955. Between September 2022 YTD and September 2023 YTD, 15 states recorded growth, while 35 states and the District of Columbia recorded a decline in multifamily permits. Delaware (+141.3%) led the way with a sharp rise in multifamily permits from 240 to 579 while Wyoming had the largest decline of 74.9% from 566 to 142. The ten states issuing the highest number of multifamily permits combined accounted for 64.0% of the multifamily permits issued. Texas, the state with the highest number of multifamily permits issued, declined 20.6% in the past 12 months while the next two highest states, Florida declined by 6.1% and California increased by 0.2%. At the local level, below are the top ten metro areas that issued the highest number of single-family permits. Top 10 Largest SF Markets Sep-23 (# of units YTD, NSA) YTD % Change (compared to Sep-22) Houston-The Woodlands-Sugar Land, TX                                           39,007 -1% Dallas-Fort Worth-Arlington, TX                                           31,938 -12% Atlanta-Sandy Springs-Roswell, GA                                           18,734 -14% Phoenix-Mesa-Scottsdale, AZ                                           18,145 -22% Charlotte-Concord-Gastonia, NC-SC                                           14,686 -5% Orlando-Kissimmee-Sanford, FL                                           13,321 2% Austin-Round Rock, TX                                           13,001 -29% Nashville-Davidson–Murfreesboro–Franklin, TN                                           11,033 -14% Tampa-St. Petersburg-Clearwater, FL                                           10,904 -14% Jacksonville, FL                                             9,707 -15% For multifamily permits, below are the top ten local areas that issued the highest number of permits. Top 10 Largest MF Markets Sep-23 (# of units YTD, NSA) YTD % Change (compared to Sep-22) New York-Newark-Jersey City, NY-NJ-PA                                           22,707 -42% Dallas-Fort Worth-Arlington, TX                                           18,725 -22% Austin-Round Rock, TX                                           16,008 -14% Houston-The Woodlands-Sugar Land, TX                                           15,277 -27% Phoenix-Mesa-Scottsdale, AZ                                           15,192 10% Los Angeles-Long Beach-Anaheim, CA                                           15,179 -5% Miami-Fort Lauderdale-West Palm Beach, FL                                           14,025 33% Atlanta-Sandy Springs-Roswell, GA                                           12,229 -18% Washington-Arlington-Alexandria, DC-VA-MD-WV                                             9,422 -39% Seattle-Tacoma-Bellevue, WA                                             8,557 -44% Related ‹ Inflation Cools While Shelter Costs Remain HighTags: home building, multifamily, single-family, state and local markets, state permits

Single-Family Permits Down in September 20232023-11-15T09:18:56-06:00

Square Foot Prices More than Double Inflation in 2022

2023-11-09T08:18:25-06:00

Median square foot prices (excluding record-high improved lot values) for new for-sale single-family detached (SFD) homes started in 2022 increased 18%, according to NAHB’s analysis of the latest Survey of Construction data. Increases for square foot prices in new custom SFD homes were similarly high, averaging 19%, more than double the US inflation of 8% registered by the CPI the same year. Median contract prices per square foot of floor area went up across all US regions, undoubtedly, reflecting fast rising construction and labor costs that pummeled home building in the post-pandemic environment. Contract prices of custom, or contractor-built, homes do not include value of improved lot as these homes are built on owner’s land (with either the owner or a contractor acting as a general contractor). Consequently, contract prices are typically lower than sale prices of spec homes. To make comparison more meaningful, the cost of lot development is excluded from sale prices in this analysis. In the for-sale market, the Pacific and New England divisions registered the highest median prices. Half of new for-sale single-family detached homes started in these divisions in 2022 were sold at prices exceeding $214 and $219 per square foot of floor area, respectively, paid on top of the most expensive lot values in the nation. The most economical SFD spec homes were started in the South region, where the median sale prices per square foot were at or below the national median. The East South Central division is home to the least expensive for-sale homes. Half of all for-sale SFD homes started here in 2022 registered square foot prices of $132 or lower, paid on top of the most economical lot values in the country. The other two divisions in the South – West South Central and South Atlantic – also registered median prices below the national median of $155 per square foot of floor area. Their corresponding prices are $152 and $150 per square foot, excluding improved lot values. Because square foot prices in this analysis exclude the cost of developed lot, highly variant land values cannot explain the regional differences in square foot prices. However, overly restrictive zoning practices, more stringent construction codes and higher other regulatory costs undoubtedly contribute to higher per square foot prices. Regional differences in the types of homes, prevalent features and materials used in construction also contribute to price differences. In the South, for example, lower square foot prices partially reflect less frequent regional occurrence of such costly new home features as basements. In the custom home market, new contractor-built SFD homes in the New England are by far most expensive to build. Half of custom SFD homes started in New England in 2022 registered prices in excess of $213 per square foot of floor area. The Mountain division came in second with the median of $200 per square foot of floor space. After showing strong appreciation of 23%, median prices in the East North Central division reached $185 per square foot– third highest in the nation.  The median custom square foot prices in the neighboring Mid Atlantic division were $160 per square foot. The Pacific division had similarly high custom square foot prices. Half of custom SFD started in the Pacific in 2022 had prices of $160 per square foot or higher. The corresponding median price in the West North Central was $155. The South Atlantic division is where most economical custom homes were started in 2022 with half of new custom homes registering prices at or below $131 per square foot of floor space. The remaining two divisions in the South – East South Central and West South Central – recorded slightly higher median square foot contract prices of $156 and $141 – all at or below the national median of $156. Typically, contractor-built custom homes have been more expensive per square foot than for-sale homes after excluding improved lot values. Over the last two decades, this custom home premium averaged slightly above 9%, suggesting that new custom home buyers were not only willing to wait longer to move into a new home but also pay extra for pricier features and materials. However, these custom home premiums largely disappeared since 2021 when median square foot prices for new for-sale homes caught up and, in five divisions, exceeded divisional custom homes square foot prices.   Pandemic-induced supply chain disruptions, skyrocketing building materials costs and home prices setting new records on a monthly basis, combined with shorter build times for spec homes and more flexibility that spec builders have in delaying sales to keep up with the production pace – all likely contributed to a faster appreciation of spec home prices per square foot in 2021. As of 2022, the custom home premium per square foot returned into a positive territory but remains well below the historic norms, suggesting that custom home buyers now less likely to pay for pricier features and materials than before the pandemic. The NAHB estimates in this post are based on the Survey of Construction (SOC) data. The survey information comes from interviews of builders and owners of the selected new houses. The reported prices are medians, meaning that half of all builders reported higher per square foot prices and the other half reported prices lower than the median. While the reported median prices cannot reflect the price variability within a division, and even less so within a metro area, they, nevertheless, highlight the regional differences in square foot prices. For the square footage statistics, the SOC uses all completely finished floor space, including space in basements and attics with finished walls, floors, and ceilings. This does not include a garage, carport, porch, unfinished attic or utility room, or any unfinished area of the basement. Related ‹ Consumer Debt Grows at Slowest Pace Since 2020Tags: chracteristics of new homes, contract price per square foot, custom home building, sale price per square foot, single-family, single-family detached, Square foot price, Survey of Construciton

Square Foot Prices More than Double Inflation in 20222023-11-09T08:18:25-06:00

Single-Family Permits Decline in August 2023

2023-10-16T08:35:49-05:00

Over the first eight months of 2023, the total number of single-family permits issued year-to-date (YTD) nationwide reached 615,453. On a year-over-year (YoY) basis, this is 15.6% below the August 2022 level of 728,866. Year-to-date ending in August, single-family permits declined in all four regions. The range of permit decline spanned 10.7% in the Northeast to 21.7% in the West. The South declined by 13.7% and the Midwest declined by 15.4% in single-family permits during this time. For multifamily permits, the percentage decline spanned 8.1% in the South region to 29.1% in the Northeast. The West declined by 12.9% and the Midwest declined by 18.3% in multifamily permits during this time. Between August 2022 YTD and August 2023 YTD, except for Hawaii (+16.8%) and Maryland (+5.2%), all the other states and the District of Columbia reported declines in single-family permits. The range of declines spanned 4.8% in New Jersey to 50.0% in Alaska. The ten states issuing the highest number of single-family permits combined accounted for 63.9% of the total single-family permits issued. Texas, the state with the highest number of single-family permits issued, declined 16.7% in the past 12 months while the next two highest states, Florida and North Carolina declined by 15.8% and 8.8% respectively. Year-to-date, ending in August, the total number of multifamily permits issued nationwide reached 394,257. This is 13.6% below the August 2022 level of 456,244. Between August 2022 YTD and August 2023 YTD, 16 states recorded growth, while 34 states and the District of Columbia recorded a decline in multifamily permits. Delaware (+145.5%) led the way with a sharp rise in multifamily permits from 1220 to 540 while Wyoming had the largest decline of 75.9% from 519 to 125. The ten states issuing the highest number of multifamily permits combined accounted for 64.1% of the multifamily permits issued. Texas, the state with the highest number of multifamily permits issued, declined 19.3% in the past 12 months while the next two highest states, Florida declined by 0.8% and California increased by 7.1%. At the local level, below are the top ten metro areas that issued the highest number of single-family permits. Top 10 Largest SF Markets Aug-23 (# of units YTD, NSA) YTD % Change (compared to Aug-22) Houston-The Woodlands-Sugar Land, TX                                         34,841 -3% Dallas-Fort Worth-Arlington, TX                                         28,282 -15% Atlanta-Sandy Springs-Roswell, GA                                         16,894 -14% Phoenix-Mesa-Scottsdale, AZ                                         15,889 -27% Charlotte-Concord-Gastonia, NC-SC                                         12,956 -9% Orlando-Kissimmee-Sanford, FL                                         11,734 -3% Austin-Round Rock, TX                                         10,925 -35% Nashville-Davidson–Murfreesboro–Franklin, TN                                           9,897 -14% Tampa-St. Petersburg-Clearwater, FL                                           9,578 -17% Raleigh, NC                                           8,726 -8% For multifamily permits, below are the top ten local areas that issued the highest number of permits.  Top 10 Largest MF Markets Aug-23 (# of units YTD, NSA) YTD % Change (compared to Aug-22) New York-Newark-Jersey City, NY-NJ-PA                                         21,605 -40% Dallas-Fort Worth-Arlington, TX                                         17,291 -23% Houston-The Woodlands-Sugar Land, TX                                         14,057 -22% Austin-Round Rock, TX                                         13,999 -18% Los Angeles-Long Beach-Anaheim, CA                                         13,324 -1% Phoenix-Mesa-Scottsdale, AZ                                         12,688 4% Miami-Fort Lauderdale-West Palm Beach, FL                                         12,685 41% Atlanta-Sandy Springs-Roswell, GA                                         11,583 -12% Washington-Arlington-Alexandria, DC-VA-MD-WV                                           8,669 -31% Nashville-Davidson–Murfreesboro–Franklin, TN                                           8,388 191% Related ‹ Building Materials Price Inflation Cools in SeptemberTags: home building, multifamily, single-family, state and local markets, state permits

Single-Family Permits Decline in August 20232023-10-16T08:35:49-05:00

Number of 5,000+ Square Foot Homes Down in 2022

2023-09-28T10:23:23-05:00

According to the annual data from the Census Bureau’s Survey of Construction (SOC), a total of 29,000 5,000+ square-foot homes were started in 2022, down from 33,000 in 2021.  In the boom year of 2006, the number of new 5,000+ square foot homes reached a peak of 45,000.   In 2007, the number fell to 37,000.  In 2008, only 20,000 such homes were started, and from 2009 to 2012, the number remained well under 20,000 a year, but has been consistently above 20,000 since then. On a percentage basis, the share of new homes started with 5,000 square feet or more of living space was also down slightly, from 2.90% in 2021 to 2.85% in 2022.  In 2015, the 5,000+ square foot home share reached a peak of 3.92%.  Since then, the share has fluctuated in a band between 2.50% and 3.10%.  The 2022 decline in the share of 5,000+ square foot homes is consistent with the recent downward trend in median and average size of new single-family homes reported elsewhere. Tabulating the major characteristics of 5,000+ square foot homes started in 2022 shows that 80% have a porch, 70% have a finished basement, 68% have 4 bathrooms or more, 66% have a patio, 67% have a 3-or-more car garage, 56% belong to a community association and 54% have 5 bedrooms or more. Related ‹ Lot Values Trail Behind InflationTags: economics, eye on the economy, home building, housing economics, single-family, starts, survey of construction

Number of 5,000+ Square Foot Homes Down in 20222023-09-28T10:23:23-05:00

Market Share for Modular and Other Non-Site Built Housing in 2022

2023-09-22T08:38:28-05:00

The total market share of non-site built single-family homes (modular and panelized) was just 2% of single-family homes in 2022, according to completion data from the Census Bureau Survey of Construction data and NAHB analysis. This share has been steadily declining since the early-2000s despite the high-level of interest for non-site built construction. This low market share in fact runs counter to some media commentary on off-site construction, which nonetheless holds potential for market share gains in the years ahead. In 2022, there were 26,000 total single-family units built using modular (12,000) and panelized/pre-cut (14,000) construction methods, out of a total of 1.02 million single-family homes completed. While the market share is small, there exists potential for expansion. This 2% market share for 2022 represents a decline from years prior to the Great Recession. In 1998, 7% of single-family completions were modular (4%) or panelized (3%). This marked the largest share for the 1992-2022 period. One notable regional concentration is found in the Northeast and Midwest. In the Northeast, 7% (3,000 homes) of the region’s 60,000 housing units were completed using non-site build construction methods, the highest share in the country. In the Midwest, 6% (7,000 homes) of the region’s 137,000 housing units were completed using non-site build construction methods. With respect to multifamily construction, approximately 2% of multifamily buildings (properties, not units) were built using panelized methods. Similar to single-family construction, this market share was expected to grow, but the expected gains did not materialize due to various constraints in the industry. In the year 2000 and 2011, 5% of multifamily buildings were constructed with modular (1%) or panelized construction methods (4%). Related ‹ Existing Home Sales Hit 7-Month Low as Prices Keep RisingTags: economics, home building, housing, modular, multifamily, panelized, single-family, SOC, systems built

Market Share for Modular and Other Non-Site Built Housing in 20222023-09-22T08:38:28-05:00
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