Forecasting the Hottest Homebuilding Markets of 2014

Multi-unit buildings are helping to swell construction activity in seven of the nation's 10 major metropolitan areas this year as new renters outpace first-time homebuyers, according to Trulia.

The real-estate website made projections on Monday for the rest of this year based on construction numbers reflected in Census and other government data that it collected from the past eight months and 2013.

According to Trulia, construction is set to rise higher than year-over-year averages in major metropolitan areas like Boston, San Jose, and New York, with more major cities based in Texas.

Boston is seeing the most construction gains with 73 percent more annualized permit activity, followed by New York (70 percent), San Jose (69 percent), Houston (61 percent), and Oklahoma City (42 percent).

Orange County, Austin, and Los Angeles helped round out the list of top performers with gains of 40 percent, 39 percent, and 34 percent. Dallas and San Francisco both saw 36-percent annualized increases in Trulia's projections.

Soaring permits didn't trigger a corresponding surge in prices in those cities, however.

Just half of those cities saw asking home prices climb higher year-over-year, according to Trulia. Only Austin, San Francisco, and Houston boasted two-digit percentage leads.

Trulia Chief Economist Jed Kolko chalked up the differentials to local market conditions, which he said "play out differently for prices and construction—which explains why few markets are having both a local construction boom and sharply rising prices."

Population-dense urban areas tend to attract multi-unit building construction, he said, which means the boom is a sign of strength for renters more than first-time homebuyers.

According to Trulia, builders also aren't building in areas with higher home vacancies, and the post-recovery rebound is better for home prices than overall construction activity. The only major metros from that list on track to return to normal construction levels are all based in housing-light California.

"Unlike home prices, which bounce back more quickly, construction recovers slowly," Kolko added. "A full recovery in construction depends on new households filling up some of the empty homes that are already out there."

The good news for multi-unit construction follows news of  improving homebuilder confidence in the single-family market, apparent from a 2 percentage-point increase in the National Association of Home Builder's Housing Market Index for August.