As the 2025 spring homebuying season begins, the national housing market is shaped by ongoing supply shortages. However, an uptick in residential construction, especially in the South, is easing affordability issues. In 2024, over half of the 1.5 million building permits were issued in this region, resulting in slower home-price appreciation or even declines. This trend suggests that increased supply leads to enhanced buyer options and moderated prices. The analysis by First American Financial Corp highlights substantial variations in home prices across different metros, directly linked to local construction activity.
In the housing market, you can't buy what's not for sale, said Sam Williamson, senior economist at First American. With existing-home sales still near historic lows, new residential construction is playing a crucial role in expanding supply and keeping prices in check.
The relationship between new-home construction and price trends is evident in many metro areas. Markets with increased construction activity tend to experience slower price growth or even price declines compared to areas with limited new supply, Williamson noted.
More homes mean more choices for buyers and less pressure on prices, Williamson said.
In markets with robust building activity, such as Tampa, prices fell 3.8% year over year in February 2025 despite high demand. By contrast, in Pittsburgh, where fewer permits were issued, prices surged 10% during the same period.
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