The pace of homebuilding activity nationally has been on the rise. In August, new home starts were up 2.3 percent, to a seasonally adjusted rate of 750,000. Residential construction activity has improved significantly over the historically low levels of building activity in 2009 and 2010. The big news on the national home construction front has been the recent uptick in construction of single-family homes, which has lagged behind the multi-family sector during the recovery. The housing sector is an important part of the national economy. The slowdown in new home building is a big part of the reason the overall economic recovery has been so anemic.
In the Washington area, construction of single-family homes has increased somewhat. Over the seven-month period from January to July 2012, there were 9,838 residential building permits issued in the 22 jurisdictions that comprise the Washington D.C. metropolitan statistical area. This level of permitting activity reflects a 3.1 percent increase over the same period in 2011.
As new home construction has increased in the region over the past year or two, the bulk of residential construction activity has been in the multi-family rental market. Even now, nearly 17 percent of all residential units planned for construction — or more than 1,600 units — are multi-family units in the District of Columbia. However, over the last few months there has been more single-family homebuilding activity and more construction activity in the suburbs. In June and July, single-family detached homes accounted for about 63 percent of all permits issued, up from 52 percent in 2011. This summer, the number of building permits for single-family detached homes was up more than 20 percent over last summer. At the same time, the number of building permits for multi-family units (including townhouses) was down nearly 40 percent.
There has also been some shift in the locations of building activity. Loudoun County, for example, accounted for a quarter of all building permits issued in the Washington region in the first seven months of 2012 (up from 22 percent in 2011.) The more distant suburbs — including Prince William County, Virginia and Frederick County, Maryland — accounted for more than a third of new building activity (up from 29 percent in 2011.)
But not all of the suburban homebuilding is single-family. In fact, there is increasingly more interest in building smaller single-family and townhouses and multi-family buildings in the suburbs. In Loudoun County, 27 percent of all building permits this year were for multi-family units, compared to 23 percent in 2011 and 10 percent in 2010.
The historically low inventories of homes for sale suggests a demand for new home construction, including a growing need for single-family homes for move-up buyers and families who are currently renting but want to own. Looking ahead, the demand will be greatest for smaller single-family units and multi-family housing. Don’t expect to see many 5,000-plus square foot single-family detached homes being built in our region like we saw during the housing boom.
Lisa A. Sturtevant is an assistant research professor at George Mason University’s Center for Regional Analysis.