Leaders and laggards in entry-level home building

Home sales have been growing nationwide but are constrained in many markets by supply not meeting demand, especially for entry-level homes.

But real estate’s localized nature means that there are some markets better addressing this shortage of homes for first-time buyers than others.

A new American Enterprise Institute Housing Center study examines new construction trends in 60 of the largest US metropolitan areas, looking at total new construction between the first quarter of 2013 and the second quarter of 2019 as a percentage of the existing housing stock.

The study uses data from Data Tree by First American and deputy chief economist Odeta Kushi says there is a clear theme.

“The cities with the greatest job growth are leading the way in new entry-level construction, adding much needed housing supply where demand is strong,” she says.

The analysis shows that most of the cities with the largest increase in entry-level home construction as a share of housing stock are those with rising demand, especially through job growth.

However, Kushi says it remains to be seen whether these cities will be able to build enough homes to maintain affordability.

In the second quarter of 2019, the 10 cities where new entry-level construction made up the greatest percentage of the existing housing stock were:

1. Austin, Texas (7.2%)
2. Boise, Idaho (5.1%)
3. Raleigh, N.C. (4.3%)
4. Houston (3.3%)
5. Dallas (3.0%)
6. Jacksonville, Fla. (2.8%)
7. Salt Lake City (2.7%)
8. San Antonio (2.7%)
9. Myrtle Beach, S.C. (2.6%)
10. Charlotte, N.C. (2.5%)

The 10 cities with the least new entry-level construction as a share of existing housing stock were:

1. Pittsburgh (0.1%)
2. Cleveland (0.1%)
3. Hartford, Conn. (0.2%)
4. Detroit (0.2%)
5. Milwaukee (0.2%)
6. Philadelphia (0.3%)
7. Chicago (0.4%)
8. Louisville, Ky. (0.4%)
9. Providence, R.I. (0.4%)
10. Los Angeles (0.4%)