According to Trulia, homebuilding remains “well below pre-bubble levels,” especially for single family homes, despite improvements in the sector, particularly in select cities where construction is above normal levels.
In advanced of home start data to be released tomorrow, Trulia took a look at local permit data for 2014 year-to-date relative to local historical norms and found that in Boston, New York, San Jose, and Houston, construction is booming. Relative to each metro’s own normal (over 1990-2013), the level of building permits this year in these areas is running at 50 percent above normal levels.
New home construction has been one of the hardest hit sectors, and while overall the industry is struggling, hot spots are emerging that are capturing economists’ attention.
Not all markets are equal
Just as in Newton’s Third Law, there are areas that are performing well below normal levels. Trulia reports that Fort Lauderdale, Detroit, Las Vegas, and Sacramento have construction activity at less than half of normal levels, as these areas were hit hard during the housing bust.
Construction is lacking in markets with a glut of vacant homes, but in the largest cities, construction is “unusually high,” which Trulia attributes to the apartment construction boom.
“Construction is from Mars, home prices are from Venus: the building recovery and the price recovery are following different logics,” says Trulia’s Chief Economist, Dr. Jed Kolko who adds, “Markets that suffered the worst housing bust have had strong price gains but a weak homebuilding recovery. A full recovery in construction depends on new households filling up some of the empty homes that are already out there – which will take much longer than the home-price recovery has.”