New home construction has been pointed as a way out of the housing inventory crisis. But even with high buyer demand, builders have struggled to ramp up construction even more due to ongoing labor, lot, and materials shortages. Some markets are faring better than others in adding more new homes to their housing pipelines.
Zonda, a homebuilding and multifamily data firm, recently selected five U.S. cities as markets of interest for new-home sales in 2022. They factored in sales performance, and homebuilding challenges from this year and 2020 as well as market indicators to predict the metros that may have the best prospects for the new-home market in the new year.
The five new-home markets that made Zonda’s list are:
1. Austin, Texas
New-home starts have reached a record high. New-home prices have jumped 27% annually in Austin, according to Zonda. “The COVID restrictions throughout Texas were much less severe than in other parts of the country,” Bryan Glasshagel, senior vice president at Zonda Advisory, told BUILDER. “With strong demand and new residents flush with equity from other markets moving into Austin, prices rapidly increased. Work-from-home and limited supply levels has continued to push growth out to new edges of the market. People are willing to look a little farther out if they aren’t commuting into an office five days a week.”
2. Charlotte, N.C.
Home prices in Charlotte, N.C., are known as being less expensive than many other big-city markets, and that has been driving more people to relocate there—particularly since the pandemic began. Also, a booming employment sector is drawing new residents. “I’m bullish on 2022 and 2023,” says Shaun McCutcheon, Zonda Advisory’s vice president. “Job growth will likely be solid, and retirees will continue to move here. Affordability will continue to be addressed—product will likely get smaller, lots will get smaller or go to attached, and builders will explore farther out locations.”
3. Salt Lake City
Annual new-home sales are up 25% from the third quarter of 2020, according to Zonda’s data. Salt Lake City has been another city to post significant growth since the pandemic began as others flee high-priced coastal areas for greater affordability—and recreational opportunities. “We see many people selling their very expensive home in California, back East, or in the Pacific Northwest, and they bring all that equity here and pay cash for a $700,000-plus home, which has had a significant impact on pricing,” Eric Allen, regional director for Zonda in Salt Lake City, told BUILDER. The median price of a single-family home has jumped 13% annually, up to $465,000 in Salt Lake City, Zonda’s data shows.
Many parts of Seattle may be tight for lots, but new-home construction is still finding a way. All of Puget Sound’s counties in Seattle have posted at least a 25% increase in home prices since the beginning of the pandemic, according to Zonda. The growth of remote work has allowed more of the city’s tech workers to leave the urban area to find housing in outlying counties within Seattle. “Townhomes are becoming more popular in traditionally rural and less dense markets,” Mark Zawistoski, Zonda regional director for the Pacific Northwest, told BUILDER.
5. Tampa, Fla.
The annual housing start pace for the Tampa market jumped by 30% over an 18-month span that started just prior to the COVID-19 pandemic beginning in 2020, Zonda reports. In 2021 alone, new-home list prices have increased more than 20%. Baby boomers are behind a lot of the surge in the area. But “migration is coming from all regions of the U.S., with the majority coming from the Northeast and Mid-Atlantic,” says Tony Polito, Zonda regional director for Central Florida/Tampa. “These are markets that are more expensive than Florida, so buyers are replacing their sold home with a cheaper alternative in Tampa. It also means they see as affordable what locals perceive as high priced. The sheer demand from migratory growth coupled with limited supply has driven prices to record levels for both new homes and resale homes.”