New first-time housing construction has been going hand-in-hand with job growth, according to First American. First American Deputy Chief Economist Odeta Kushi notes that of the top cities by home construction, it is unsurprising that “four of the top 10 new construction cities are in Texas, where the labor market has recently been described as ‘red hot.’”
“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,” Kushi said.
The greatest rates of new construction as a share of the existing housing stock tend to be in the Southwest and Southeast U.S., and high rates of new construction follow high rates of job growth. Between January 2013 and September 2019, the average annual job growth rates in all 10 top new construction cities exceeded the national metropolitan average of 1.4%. In Q2 2019, some of the cities where new entry-level construction made up the greatest percentage of the existing housing stock were, Austin, Texas; Boise, Idaho; Raleigh, North Carolina; Houston; and Dallas.
Kushi notes that in top city Austin, where entry-level construction comprised 7.2% of the existing housing stock, the level of construction is likely needed to keep up with employment gains in the area, as Austin has seen major tech companies move in, including Apple, Google, Facebook, and Amazon. Austin added 232,200 jobs between January 2013 and September 2019, a growth rate of 3.7%, placing third among large metropolitan areas with a population of 1 million or more.
First American also found that the cities with the least new construction tend to be in the Northeast and Midwest regions. Cities with the least new construction added, on average, only 0.3% to their housing stock through new construction. Pittsburgh, which ranked the lowest of the 60 metros, only added 0.1 percent through new construction. Accordingly, Pittsburgh added less than 31,400 jobs between January 2013 and September 2019, an average annual job growth rate of 0.5 percent. In this case, the existing housing stock in Pittsburgh is enough to sustain the current demand.
“Increasing construction of entry-level homes will be especially important to attract young millennials looking to become homeowners, as well as other job seekers attracted by the growing number of tech and financial services jobs in these markets,” Kushi added. “However, it remains to be seen how these top new construction cities will fare in terms of affordability. Will they build enough housing to stave off faster house price appreciation?”