Housing Demand Shifts to Low-Density Markets

Early in the pandemic, housing activity came to an abrupt halt. Now, demand has rebounded, but the dynamics have changed. Housing demand has shifted to low-density markets and areas where homebuyers can purchase larger homes more conducive to remote work and distance learning models.

As a result of the shifting demand, home investors and developers are finding new opportunities to develop housing. After falling sharply at the beginning of the pandemic, new home construction has rebounded rapidly and is now near pre-pandemic numbers, according to research from Porch. New home sales follow a similar pattern, but new home sales have recently surpassed pre-pandemic numbers.

While new construction has rebounded, it varies significantly across the US. During the pandemic, new housing development has also shifted to follow new demand patterns. Porch research shows that southern and mountain states are investing the most in new housing this year.

At the top of the list, Idaho, Utah, South Carolina and Arizona have permitted the most new housing units per capita, and Texas and Florida have issued the most housing permits in total. BTI Partners, for example, is developing a 1400-acre master-planned site called Crossprairie in Osceola County, Florida. In addition, a joint venture between Trendmaker Homes and Toll Brothers is building Lakes at Creekside, a master-community with 260 homes on 70 acres in northwest Houston, Texas.

On the other hand, more populated states are not seeing an increase in new housing development. Northeastern states in particular have hardly seen any new housing development, including Rhode Island, Connecticut, Pennsylvania and New York.

Porch also analyzed housing development activity in individual metros. It looked only at markets with at least 100,000 residents and at least 70% coverage in the company’s building permits survey. Northeastern markets were missing from the list entirely, while the top metros also reflected states with the most building permits. Austin-Round Rock-Georgetown, Texas, topped the list, followed by Raleigh-Cary, North Carolina; Nashville-Davidson/Murfreesboro/Franklin, Tennessee; and Jacksonville, Florida. In the Austin area, the median home price is $353,051, while the other markets at the top of the list had median home prices below $300,000. This also shows that home demand is moving to affordable markets.

In some ways, this new trend is really an acceleration of an existing trend. Millennials had already been moving to more suburban markets to start families; however, this demographic may face a glaring challenge brought on by the pandemic: a lack of supply. Limited opportunities to purchase a new home is creating strong competition and putting upward pressure on home prices.