The state of the U.S. housing market has been one of the dominant economic stories since the start of the COVID-19 pandemic. The market saw unprecedented price growth over the last two years, and rapidly rising housing costs have been one of the major contributing factors in the historic run of inflation experienced in the U.S. economy over the last year. Now, with interest rates rising and low- and middle-income households increasingly priced out of the market, a slowdown in the housing market could portend a recession later this year or in 2023.
Record low interest rates, strong savings rates and wage growth, and shifting consumer preferences for housing were among the conditions that spurred high demand for residential real estate over the last two years. But the increase in demand only exacerbated larger challenges with housing supply that predated the pandemic. According to a 2021 report from federal mortgage backer Freddie Mac, the U.S. is short nearly 4 million housing units based on the country’s population and housing needs.
One reason for the shortage in supply is significant underinvestment in new housing since the housing bubble burst in the mid-2000s. Seasonally-adjusted spending on residential construction peaked above $1 trillion in inflation-adjusted dollars early in 2006, but the bottom fell out of the housing market shortly after, and spending plummeted by more than two-thirds as the Great Recession took hold. In the ensuing recovery, residential construction spending was slow to rebound but grew gradually from 2012 to 2018, before falling again amid interest rate hikes. It was not until the recent housing frenzy that residential construction began to accelerate. Spending has increased by more than 33% since the pandemic began in March 2020, and today residential construction spending is approaching peaks last seen in the housing bubble.
And during this period of slow growth in housing, the U.S. continued to grow in population. From 2010 to 2020, the U.S. added residents at a faster rate than it added housing units, leaving a larger number of people to compete for a limited amount of housing stock. But in 2021 and 2022, the percent change in housing units since 2010 has topped the growth in population, which could bring some relief to the market’s recent supply challenges in the near future.
But despite recent encouraging signs in housing investment, much of the country must catch up to meet the overall need for housing. From 2010 to 2020, 20 states added population at a faster rate than they added housing, a fact that was true even among most of the states that added housing the fastest. Of the top 10 states for housing growth over the last decade, only North Dakota, South Dakota, and Delaware added housing faster than they added residents.
At the metro level, a number of fast-growing cities are rapidly adding housing stock to meet growing demand. Booming metros like Nashville, Austin, and Charlotte are among the U.S.’s top cities for housing growth over the last decade as they contend with an influx of new residents.
The data used in this analysis is from the U.S. Census Bureau’s American Community Survey (2020). To determine the locations that have seen the largest growth in housing over the last decade, researchers at Stessa calculated the percentage change in housing units from 2010 to 2020. In the event of a tie, the location with the greater total change in housing units was ranked higher.
The analysis found that Tennessee experienced an 8.2% increase in new housing units during the study period, compared to the national increase of 6.5%.
Here is a summary of the data for Tennessee:
- Percentage change in housing units (2010-2020):+8.2%
- Total change in housing units (2010-2020):+226,670
- Total housing units (2020):2,996,127
- Total housing units (2010):2,769,457
- Percentage change in population (2010-2020):+8.6%
- Percentage of housing units that are owner occupied (2020):5%
For reference, here are the statistics for the entire United States:
- Percentage change in housing units (2010-2020):+6.5%
- Total change in housing units (2010-2020):+8,394,671
- Total housing units (2020):138,432,751
- Total housing units (2010):130,038,080
- Percentage change in population (2010-2020):+7.4%
- Percentage of housing units that are owner occupied (2020):4%
For more information, a detailed methodology, and complete results, you can find the original report on Stessa’s website: https://www.stessa.com/blog/cities-largest-growth-in-housing/