A newly-released Trulia report has compared the homebuilding statistics of 100 urban U.S. cities.
Researchers utilized the U.S. Census Bureau building permit data, compared it to the historical average, and determined which metros conducted the most homebuilding activity throughout the year. Boston has been ranked amongst the top-producing metros, trailing only San Francisco and Austin when comparing each city’s homebuilding rates to their historic averages.
These Cities are Building Most Relative to Historic Average
The report used comparisons of each city’s homebuilding rates to their historical averages, based on the number of building permits issued between 1980 and 2017.
While Austin, Charleston and Nashville were on track to rank highest amongst homes built in 2017, Boston and San Francisco delivered an unprecedented climb during the second half of 2017. Boston’s 8,422 total permits in 2017 helped propel the city to finish at 72.4% above average, up from 61% at mid-year.
While San Francisco racked up 6,270 permits compared to Boston’s 8,422, the City by the Bay had approved 94.6% more homes in 2017 than its average between 1980 and 2016. Austin and Boston rounded out the top three, having built 79.5% and 72.4% more than their historic average, respectively.
At 23,257 combined units, the markets of San Francisco, Boston and San Jose have held a large share of multifamily permits. These permits, which primarily lead to new rental housing stock, are likely to ease rent prices in Boston instead of home prices.
Causes of Homebuilding Progress
With their 2016 homebuilding report, Trulia found that job growth, income growth, and home price growth were all positively correlated with whether a market was building more or less today than in the past. Its no surprise that Boston’s job growth has helped contribute to its flourishing homebuilding rates.
Boston was ranked one of the nation’s twelve largest metropolitan statistical areas in October 2017. Massachusetts posted the strongest year-over-year job gains through May 2016 (increasing 1.6 percent) and was the only New England state to meet or exceed the national job growth pace during that time period.
Interestingly, the study concluded that building “up” vs. building “out” matters in how well a market builds homes. The more a market builds high-rise apartment towers as a total of all units, the better chance it has to beat its historic homebuilding average last year. 73.8% of permitted Boston homes were five-plus-unit buildings, helping the city secure its ranking.
Researchers speculate that it’s likely demand for new housing in the U.S. is occurring in places that are already built out, so cities like Boston will continue to need to build upwards. This correlation is clear with the high volume of high-rise buildings approved and under construction in the city.
The Importance of Homebuilding Rates
As the report contends, homebuilding rates matter because newly-built homes are a source of new home inventory and construction jobs. They help increase existing inventory through a chain-reaction effect: buyers of new homes often sell their existing one, which frees up a home for someone else, who in turn decides to buy it and sell their home, which then becomes a home for a first-time homebuyer.
Last year, researchers found that new homebuilding was the single best predictor of increases in home inventory in the U.S. With a wealth of residential developments on the rise in the city, Boston’s 2018 homebuilding forecast is looking bright.
Click below for a link to Boston’s Development #CraneWatch – featuring proposed, approved and constructed developments throughout the city: