States Investing the Most in New Housing

The United States is experiencing one of the longest periods of economic expansion in its recent history with both employment rates and real median income rising. However, the number of newly constructed residential buildings nationwide is still far below its 2005 peak of 2.2 million units, with only 1.3 million units breaking ground in 2018.

Residential building is a widely used indicator of the health of the economy. Not only does construction directly create jobs and bring investment, but it also serves as an indicator of consumer confidence and financial stability. Given variation in economic activity, urbanization, and geographic differences between states, researchers at Construction Coverage wanted to see how new housing construction varies across the U.S. at the state level. Using the most recent annual data from the U.S. Census Bureau and Zillow, Construction Coverage ranked the 50 states and the District of Columbia by the number of new housing units per 10,000 residents. Here’s what they found:

Takeaways

1. Across the entire U.S., the number of new housing units per capita scheduled for construction in 2018 was 41 units per 10,000 people. At the state level, this number ranged from a low of 12 in Rhode Island to a high of 89 in Idaho. States investing the most in residential construction tend to be experiencing above average employment and income growth.

2. Many states are prioritizing high-density housing over traditional single-family homes to provide more affordable options for residents. While high-density residential structures (e.g. apartment buildings) comprise only 1 percent of all new homes in Louisiana, they make up 95 percent of all new construction in the District of Columbia. Because of this, the average valuation of a new residential unit in the nation’s capital is 80 percent lower than its Zillow Home Value Index. Construction Coverage found this relationship exists across all states: as the proportion of high-density housing increases, the average unit value decreases. Furthermore, the most expensive states for homeownership tend to be investing more in high-density projects.

3. Residential real estate investment is loosely correlated with affordability. Among U.S. states, as home price relative to income increases, so does the number of new homes per capita. In other words, more homes are being built in less affordable states. This is good news for prospective buyers in expensive states where demand for housing has recently outpaced supply.

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Here are the states investing the most in new housing, along with data on their relative values, affordability, and density.

The 15 States Investing the Most in New Housing

15. Georgia

• New homes per 10k residents: 55.5
• New vs. existing home value: 7% higher
• Ratio of median home value to income: 3.2
• Proportion of new high-density homes: 28%
• 5-year employment growth: 14%
• 5-year income growth: 19%

14. South Dakota

• New homes per 10k residents: 55.8
• New vs. existing home value: 10% lower
• Ratio of median home value to income: 3.3
• Proportion of new high-density homes: 36%
• 5-year employment growth: 4%
• 5-year income growth: 17%

13. Tennessee

• New homes per 10k residents: 56.5
• New vs. existing home value: 16% higher
• Ratio of median home value to income: 3.2
• Proportion of new high-density homes: 22%
• 5-year employment growth: 11%
• 5-year income growth: 20%

12. Nevada

• New homes per 10k residents: 58.5
• New vs. existing home value: 26% lower
• Ratio of median home value to income: 4.9
• Proportion of new high-density homes: 26%
• 5-year employment growth: 16%
• 5-year income growth: 17%

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11. Arizona

• New homes per 10k residents: 58.7
• New vs. existing home value: 6% lower
• Ratio of median home value to income: 4.3
• Proportion of new high-density homes: 21%
• 5-year employment growth: 13%
• 5-year income growth: 18%

10. Delaware

• New homes per 10k residents: 63.4
• New vs. existing home value: 45% lower
• Ratio of median home value to income: 3.7
• Proportion of new high-density homes: 7%
• 5-year employment growth: 2%
• 5-year income growth: 8%

9. Washington

• New homes per 10k residents: 63.9
• New vs. existing home value: 46% lower
• Ratio of median home value to income: 5.3
• Proportion of new high-density homes: 46%
• 5-year employment growth: 12%
• 5-year income growth: 23%

8. Texas

• New homes per 10k residents: 66.5
• New vs. existing home value: 5% lower
• Ratio of median home value to income: 3.2
• Proportion of new high-density homes: 33%
• 5-year employment growth: 13%
• 5-year income growth: 17%

7. District of Columbia

• New homes per 10k residents: 66.5
• New vs. existing home value: 80% lower
• Ratio of median home value to income: 7.0
• Proportion of new high-density homes: 97%
• 5-year employment growth: 16%
• 5-year income growth: 24%

6. North Carolina

• New homes per 10k residents: 66.6
• New vs. existing home value: 8% higher
• Ratio of median home value to income: 3.4
• Proportion of new high-density homes: 29%
• 5-year employment growth: 12%
• 5-year income growth: 17%

5. Florida

• New homes per 10k residents: 67.8
• New vs. existing home value: 6% lower
• Ratio of median home value to income: 4.3
• Proportion of new high-density homes: 31%
• 5-year employment growth: 15%
• 5-year income growth: 17%

4. South Carolina

• New homes per 10k residents: 71.0
• New vs. existing home value: 34% higher
• Ratio of median home value to income: 3.2
• Proportion of new high-density homes: 16%
• 5-year employment growth: 13%
• 5-year income growth: 17%

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3. Colorado

• New homes per 10k residents: 81.1
• New vs. existing home value: 37% lower
• Ratio of median home value to income: 5.4
• Proportion of new high-density homes: 34%
• 5-year employment growth: 13%
• 5-year income growth: 22%

2. Utah

• New homes per 10k residents: 84.6
• New vs. existing home value: 30% lower
• Ratio of median home value to income: 4.7
• Proportion of new high-density homes: 25%
• 5-year employment growth: 15%
• 5-year income growth: 20%

1. Idaho

• New homes per 10k residents: 88.7
• New vs. existing home value: 23% lower
• Ratio of median home value to income: 4.7
• Proportion of new high-density homes: 19%
• 5-year employment growth: 11%
• 5-year income growth: 15%

Methodology & Full Results

Data on approved housing units and their valuations by state is from the U.S. Census Bureau Building Permits Survey. The analysis considers data from January to December 2018. State population, median income, and employment were obtained from the U.S. Census Bureau 2017 and 2012 American Community Survey 1-Year Estimates.

To calculate the number of new housing units per 10,000 residents, the total number of housing units per state was divided by the population in the given state and then multiplied by 10,000.

The new vs. existing home value was calculated as the percentage difference between each state’s average unit value and its Zillow Home Value Index.

Home affordability is calculated as the ratio of the Zillow Home Value Index to the median household income.