The sector breakdown of the housing industry has notably changed over the past two decades. New-home building represented 16% of overall housing transactions in the early- and mid-2000s. Today, it makes up 12%. Ali Wolf, director of economic research for BUILDER’s sister company Meyers Research, was curious about how this trend varied over time as well as by market, and she provides the highlights below.

The new-home industry is a vital part of the U.S. economy. New-home buyers are estimated to spend 10% more on appliances, furnishings, and property repairs and alterations compared with those buying an existing home. In addition, it is calculated that for every 1,000 average single-family homes built, 2,975 jobs are created. This is considerably higher than the 500 jobs attributed to 1,000 existing home sales and is spread across more specialties, including land development, private equity, banking, construction, government, and architecture.

The new-home market is also critical in addressing today’s supply and demand imbalance. Home builders are able to bring inventory to a market where the already short supply is exacerbated by the lock-in effect of low mortgage rates encouraging existing homeowners to stay put.

The drop in overall market share for new homes, however, is largely due to exogenous factors. Builders and developers are aware of the supply shortage and the opportunities created by today’s demographics, but land availability, land costs, a lack of labor, and strict government regulation are holding them back.

As we all know, home building is local. The 12% new-home market share is low nationally, but the percentage varies widely by market. For example, the current new-home market share of 17% in Las Vegas is low compared with the 45% capture in 2006. To look at this trend closer, we studied the top markets in the country to identify where new-home sales remain a big part of overall transactions. The metros in the chart below are sorted by highest to lowest based on 2019’s year-to-date new-home market share.

From our research, we found:

  • New-home sales are approaching 30% of the market in Austin and Raleigh.
  • The top 10 markets with the largest new-home share are in Texas or the Southeast. Las Vegas is the exception.
  • Of all the top U.S. markets, the ones with the biggest change compared with 2006 are Las Vegas (-27%), Miami (-22%), Phoenix (-19%), Riverside (-19%), and San Diego (-18%). The markets with the smallest change are Austin (flat), Salt Lake City (-1%), and Baltimore (-3%).
  • Among top markets, the share only increased compared with 2010 in Austin, Dallas, Salt Lake City, and Denver.

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