Sun Belt metros are leading the way when it comes to building new homes–and they need them, with scores of buyers moving in from other parts of the country, causing inventory to dwindle and prices to surge.
Austin, TX had 31.1 single-family building permits per 10,000 people in the first quarter, the most per capita of any major U.S. metro. It’s followed by Raleigh, NC (30.7), Jacksonville, FL (29.2), Nashville, TN (26.6) and Charlotte, NC (22.9).
Five other Sun Belt metros round out the top 10: Phoenix (22.7), Houston (22.4), Orlando, FL (20.3), Dallas (18.5) and Las Vegas (17.2).
For multifamily properties, the top 10 list is split between Sun Belt metros and northern metros. Austin leads the pack again, with 26.1 multifamily building permits per 10,000 people in the first quarter, followed by Jacksonville (19.9), Salt Lake City (16.7), Orlando (12.7) and Denver (12.6). Seattle (11.9), San Antonio, TX (11.5), Richmond, VA (11.5), Minneapolis (11.1) and Charlotte (11) round out the top 10.
All in all, 49 of the 53 U.S. metros with more that 1 million residents issued more single-family building permits per capita in the first quarter than they did on average in the 10 years prior to the pandemic (2010-2019). Thirty-eight of them issued more multifamily permits. See the bottom of this report for a table with the number of single-family and multifamily building permits for each of the 53 metros included in this analysis.
Building permits, which are government-granted authorizations allowing builders to begin construction, are a good way to gauge how many newly built homes are coming down the pipeline. This analysis includes U.S. metros with more than 1 million residents, and defines “single-family” as buildings with one to four housing units and “multifamily” as buildings with 5+ housing units.
Homebuyer demand has started cooling, housing supply is declining at a slower pace than it was at the peak of the pandemic and sales of new homes are down. But the number of homes for sale remains near all-time lows and monthly mortgage payments are near their record high, partly due to mortgage rates that have risen from roughly 3% to over 5% in recent months. Building more homes is one of the best ways to ease the affordability crisis.
“If there had been enough homes at the start of the pandemic, housing costs might not have skyrocketed the way they did over the past two years,” said Redfin Chief Economist Daryl Fairweather. “The government should support homebuilding with things like subsidies and upzoning even as demand pulls back so the housing-supply hole starts to fill in. There still aren’t enough homes to meet the pace of household creation, and we need to be more prepared when demand inevitably picks back up.”
Homebuilders are focused on sprawling Sun Belt metros partly because they have become increasingly popular destinations for homebuyers moving from one part of the country to another. That’s because remote work has allowed people to prioritize affordability, warm weather and other personal preferences over proximity to the office. Jacksonville, Nashville, Phoenix, Houston and Las Vegas were all among the 20 most popular destinations for homebuyers moving from one metro to another in April. Austin was one of the most popular destinations of 2021 before dropping off this list this year, likely because it is now prohibitively expensive for a lot of buyers.
The number of homes for sale dropped more than 20% year over year in Raleigh, Jacksonville and Charlotte, and half of the 10 places with the most single-family permits saw supply decline more than the 9% national drop.
Sun Belt home prices are skyrocketing and affordability is eroding quickly . The 10 metros with the most single-family building permits per capita in the first quarter all saw sale prices shoot up more than the national level of 15.5% year over year in April. Prices in Las Vegas surged 29%, more than anywhere else in the country, while prices in Nashville, Orlando, Raleigh and Phoenix were also among the 10 metros with the fastest-increasing prices (all growing at least 25%).
“Rapidly rising home prices in the Sun Belt highlights the need for more homes,” said Redfin Deputy Chief Economist Taylor Marr. “The hope for buyers is that building new homes will tame price growth so that housing remains more affordable than pricey coastal areas, especially with mortgage rates higher than they have been in recent years. It may become even more important to build if higher rates continue to drive out-of-town buyers to the Sun Belt.”
While more new construction increases the total number of homes on the market, new homes are more expensive. The typical newly built home nationwide sold for $470,000 in the first quarter (up 19.2% year over year), while the typical existing home sold for $403,000 (up 16.7%). Another barrier for homebuyers is competition from investors: Newly built homes made up more than 25% of houses bought by investors in the fourth quarter, up from 3% two years earlier.
The story is similar in the rental market, with outsized price growth in five of the top six metros with the most multifamily building permits per capita. Austin, Jacksonville, Orlando, Denver and Seattle all saw asking rents rise more than the 15% national increase in April, with Austin coming in number one (+46% year over year). Rents have risen a great deal in those places partly because home prices have surged, leading to increased rental demand.
Minneapolis is a notable exception. Asking rents fell 2% year over year in Minneapolis, number 9 on the list of metros building the most multifamily units. It was one of just three U.S. metros where rents fell in April, joining Milwaukee (-8%) and Kansas City (-4%).
“Minneapolis is an apt example of how housing options and rental affordability improves when local governments change policies,” Marr said. “Minneapolis abolished single-family zoning in 2018, paving the way for more multifamily rentals, and that’s translating to lower rents. Building more rentals could have a similar effect in places like Austin and Seattle, where it’s becoming difficult for the average renter to afford monthly housing costs without making sacrifices in other parts of life.”
On the other end of the spectrum, Hartford, CT has 1.3 single-family building permits per 10,000 people, the fewest of the metros included in this analysis. It’s followed by New York (1.9), Buffalo, NY (2.1), Chicago (2.3) and San Francisco (2.3). Next come Los Angeles (2.6), Boston (2.6), Providence, RI (2.7), San Jose, CA (2.9), Milwaukee (2.9) and Detroit (2.9).
California has a lack of vacant land and less space zoned for housing development. Another reason for the relative lack of building permits in those areas is the outflow of homebuyers. New York, Chicago, San Francisco, Los Angeles, Boston, San Jose and Detroit are all among the top 20 metros homebuyers are leaving. Home-price growth is slower than the national median in nine of those 10 metros (San Jose is the exception).
The pandemic-driven homebuying boom intensified an existing housing shortage, drove up home and rental prices and brought the need for newly constructed homes sharply into focus.
“We built fewer homes in the 2010s than we have since the 1960s, which is one of the fundamental problems with today’s housing market–especially with millennials, the biggest generation , now in their prime homebuying years,” Fairweather said. “Builders were hit hard by the housing crash–and home construction didn’t fully recover because of a combination of rising material and labor costs and restrictive zoning. Since the start of the pandemic, builders have run into additional problems, with a shortage of materials and skyrocketing lumber costs . As a result, the U.S. is roughly 4 million houses short of meeting homebuyer and renter demand.”
There are promising signs that homebuilders are making progress adding new supply. U.S. building permits were up 3.1% year over year in April after plummeting in mid-2020 at the onset of the pandemic. More than 1.7 million homes–including both single-family and multifamily properties–were under construction in March, the highest level since 2006.
But even though building permits were up from the year before in April, they dipped about 3% from March as builders reacted to rising mortgage rates and slipping homebuyer demand, with sales of newly built single-family homes down 26.9% year over year in April amid high prices and high mortgage rates. Builder sentiment fell to a two-year low in May. Still, the outlook for building new homes is better than it was a year ago. If mortgage rates continue to plateau, builders may feel more confident in the outlook for demand.
Includes both single-family and multifamily permits. Includes metro areas with populations larger than 1 million.
Ranked by most-to-least single-family (1-4 unit) permits per 10,000 people
The building permit stats in this report are from the U.S. Census Building Permits Survey data showing the number of building permits per 10,000 people in the first quarter of 2022 in U.S. core-based statistical areas with populations larger than 1 million. In this report, “single-family” refers to properties with 1-4 units, and “multifamily” refers to properties with 5+ units. The popularity of migration destinations is determined by net inflow, a measure of how many more Redfin.com users are looking to move into a metro area than leave. Net outflow is a measure of how many more Redfin.com users are looking to leave a metro area than move in.
