July 2024 New Residential Construction
What happened
There was a pronounced downturn in new residential construction activity across the United States in July after a positive swing the month before. Permits issued for new housing units fell to 1,396,000 on a seasonally adjusted annual basis, down 4.0% from June and 7.0% year-over-year. Housing starts dropped from June’s level by 6.8%, and remain 16.0% below the housing starts figure from last year at this time. Housing completions decreased from their June rate by 16.0%, but remain above 2023 levels by 13.8%. Multi-family projects were the focus of the slide in completions, falling 24.4% month-over-month, while single-family completions actually rose by 0.5%.
Where it happened
July was an especially tough month in the Midwest (-16.5% year-over-year) and Northeast (-25.4% YoY) when it comes to housing completions, while activity dipped slightly in the South (-2.9%) and grew in the West (+13.4%). This pattern is a reversal of last month’s trends, but follows the market in general, as total for-sale inventory is currently growing faster in the South and West than in the Midwest and Northeast. Inventory across the country remains low relative to pre-pandemic norms, but these new builds coming onto the market will help to address the existing gap.
In the coming months and years, most new homes will be built in the South region, where permits for 776,000 housing units were issued in July on a seasonally adjusted annual basis, compared to 303,000 in the West, 181,000 in the Midwest, and 136,000 in the Northeast. This hierarchy has been consistent for the past several years, as builders target inexpensive land and high demand for Sun Belt living. Of those newly permitted builds in the Northeast, 56.6% are for multi-family units, the highest share of any region. The South leads in the share of permits for single family homes, at 72.7%.
What does this mean for homebuyers, sellers, homeowners, and the housing market
As mortgage rates begin to fall, many potential homebuyers will come off the sidelines and begin to look for new homes. Builders are hoping to thread the needle with their price points on new homes in coming months, attracting buyers whose budgets have recently expanded but competing against existing homes coming onto the market as sellers are more willing to move under newly favorable buying conditions. Price too low and they’ll miss the opportunity to fully cash in on a hotter housing market; price too high and they’ll lose out to new listings of existing homes.
For buyers looking to purchase a home, new construction may be more feasible than they expect after a year of increased new home completions and decreased levels of new home sales. A new home means less upkeep, more amenities, and locations in fast-growing parts of major cities. Buyers should monitor new construction listings on Realtor.com as part of their home search as they begin or continue their search for new homes.