August 2024 New Residential Construction
What happened
New residential construction ticked back up in August after a weaker July. The number of units permitted for construction rose to 1,475,000, up 4.9% from last month but still down 6.5% year-over-year. Housing starts were up 9.6% month-over-month and up 3.9% year-over-year, while housing completions continued to soar, beating July by 9.2% and last August by 30.2%. The completions figure experienced a major reversal in trend compared to July, as multi-family projects constituted most of the growth (up 36.5% month-over-month) while single-family projects slowed down (down 5.6% month-over-month).
Where it happened
Regionally, new home completions are concentrated in the South, both in terms of overall volume and growth. Completions in the South reached a seasonally adjusted annual level of 1,103,000 units in August, up from 898,000 in July (+22.8%) and 771,000 (+43.1%) last August. The South is home to over 60% of newly completed units nationwide, and sees the same pattern of being driven primarily by multifamily projects. Meanwhile, completions were basically flat month-over-month in the Northeast and fell by over 8 percentage points in both the West and Midwest.
On a permitting basis, though, the South’s growth is more modest (up 6.0% month-over-month) and is eclipsed by the Midwest (up 12.5% month-over-month). With permits down from August 2023 in both of these regions and across the country, we see builders exercising some caution in the long term, even as they try to capitalize on lower mortgage rates by accelerating completions in the short term. Lower mortgage rates mean more potential buyers of new homes, but also more competition from existing homes as homeowners who bought with better financing terms in the past become willing to sell.
What does this mean for homebuyers, sellers, homeowners, and the housing market
The fall is the best time to buy a home, our research shows, as prices are generally lower and inventory more plentiful than at other times of the year. This fall may be particularly advantageous for buyers following the strong new construction activity of August, offering even more opportunities to purchase a new build amid an improving borrowing environment. Buyers looking for new construction can focus their efforts in the 10 states highlighted in our first New Construction Insights Report, which offer a higher share of newly-built homes on the market at lower premiums relative to existing homes and a strong rate of permitting for future projects.