New Home Sales: Up Most in Southern and Western Metros with Big Population Gains

Dallas and Houston Metros had Largest Number of New Home Sales Last Year

By Frank Nothaft Consumer Behavior, Real Estate

New homes are in big demand in markets with a fast-growing population.  The states with the largest annual increase in population during 2019 were Texas (367,000 more residents) and Florida (233,000 increase).  States with smaller populations may not have net increases as large but can have rapid percentage gains.  Nevada and Idaho had annual population growth of more than 1.7% in 2019, the fastest growth rate among U.S. states.[1]

Exhibit 1: New-Home Sales Highest in the South

We examined CoreLogic’s public records and found annual new home sales were largest or had increased the most in places that had large population gains. (Exhibit 1) The two metropolitan areas with the largest number of new home sales were Dallas and Houston, with more than 30,000 annual sales.  Six of the ten metros with the largest number of new sales were in Texas and Florida, the two states that have seen the largest population gains.

Exhibit 2: South & West Lead New-Home Growth

Further, the places that had the largest percentage increase in annual new home sales were all mid-sized metros located in the South and West. (Exhibit 2)  Of metros with more than a 15% annual increase in sales, more than one-half were located in Texas and Florida.  These places had lower housing costs than in high-cost markets and had a collective unemployment rate that was two-tenths of a percentage point lower than the U.S. rate.[2]  Many were also located in the sunbelt, and attractive to retirees looking for a lower-cost place to live.

Exhibit 3: Mortgage Financing for New Home Buyers

To finance their new-home purchase, nearly two-thirds of buyers obtained a conventional conforming loan, although the financing varied greatly by home price. (Exhibit 3) For prices at or below $250,000, one-half of buyers used a conventional conforming loan and the other half a federal government program.  For homes priced above $1 million nearly all loans were conventional, with more than 80% jumbo in size.

With family incomes expected to rise and mortgage rates to remain low through 2020, household growth and the need for additional home construction will continue.  Metros in the South and West will likely continue to lead the nation in new home sales.

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[1] U.S. Census Bureau, Population Division, Table 3. Estimates of Resident Population Change for the United States, Regions, States, and Puerto Rico and Region and State Rankings: July 1, 2018 to July 1, 2019 (NST-EST2019-03) at https://www.census.gov/data/tables/time-series/demo/popest/2010s-national-total.html

[2] U.S. Bureau of Labor Statistics, seasonally adjusted data for October 2019.  The U.S. unemployment rate was 3.6%; the unemployment rate for the metros listed in Exhibit 2 averaged 3.4%.