Discourse about the new-home market often shines the spotlight on the largest production markets. Think Dallas, Houston, Phoenix, and Atlanta. However, beyond these markets there is another group worth watching: The “Next 25,” markets ranked No. 26 to No. 50 for new construction.
Starts data from Zonda, NewHomeSource’s parent company, approximates the Next 25 markets totaled 82,400 annualized starts. That is around a quarter of the output of the Top 25 markets (327,700 annualized starts). While this may seem a modest number compared to the Top 25 markets, the Next 25 are growing contributors to the U.S. housing supply, with their combined output increasing by 6% since 2019.
Looking ahead, more housing starts in the Next 25 markets means more homes will be available in the coming months. This can translate into a wider range of floor plans, communities, and price points for prospective shoppers to choose from. It also could mean more incentives for slower markets, including rate buydowns to help solve for affordability challenges or upgraded finishes.
“For those seeking more housing supply, the key is to follow home builders,” says NewHomeSource chief economist Ali Wolf. “Although increasing resale supply makes the market feel more balanced than it was during the pandemic, existing homeowners who sell often re-enter the market as buyers. In contrast, new-home supply represents a net increase in a market’s inventory since it doesn’t directly generate a proportional increase in demand.”
Below are some highlights about the Next 25 markets to help you understand the major shifts in starts activity across these markets.
Top Growth Markets Since 2019:
Over two-thirds of the Next 25 markets have seen housing starts grow compared to the pre-pandemic period. Four Florida markets have more than doubled their housing starts output since 2019:
The Villages: Starts are up 100% since 2019 and up 102% on a year-over-year basis.
Port St. Lucie: 108% starts growth since 2019, partially reflecting the market’s strong in-migration in 2021 and 2022.
Ocala: 108% starts growth since 2019, driven by a high volume of retirees and greater affordability relative to other nearby markets.
Punta Gorda: The market has posted a staggering 195% increase in starts activity since 2019.
Recent Growth Leaders:
When looking at starts activity relative to last year, less than half of the Next 25 markets have experienced growth. A few annual growth standouts include:
Port St. Lucie: As mentioned above, the Florida market has experienced a 102% year-over-year increase in starts activity.
San Diego: The California market has experienced 32% annual growth in starts activity despite the area’s high coastal prices.
Durham, North Carolina: Benefiting from strong tech sector and university-driven growth, the market has experienced a 27% year-over-year increase in starts.
Stockton, California and Ogden, Utah: Both markets recorded 22% annual gains in starts activity.
Salt Lake City: The Utah market has experienced a 15% increase in starts activity relative to last year.
Portland: The Oregon metro, ranked No. 26 for total starts, posted a 21% increase in starts relative to last year. The market’s 6,104 annualized starts volume is just behind the pace of the No. 25 market, Seattle (6,317 annualized starts).
Markets Under Pressure:
Several markets are experienced construction slow on a year-over-year basis, either due to affordability challenges or shifting migration. The markets under pressure include:
Los Angeles/Orange County: Starts in the California market is down 23% on a year-over-year basis, dropping by 1,400 on an absolute basis. The market’s starts activity is also 42% below 2019 levels.
Punta Gorda: While this market was highlighted above for its outsized growth since 2019, the market’s starts activity is down 20% compared to last year’s pace.
Six other markets posted double-digit declines in annualized starts compared to last year: Tucson, Arizona (-14%); Cape Coral, Florida (-14%); Greeley, Colorado (-13%); Fresno, California (-12%); New York (-11%); and Naples, Florida (-11%).
