By every available measure the expansion in this area so far has been extraordinary. Over the six months ended this past March, the most recent period for which data are available, new home sales have expanded at an almost 12% annual rate. New construction on residences has expanded at an astronomical 30% annual rate. The difference between sales and new construction starts might raise concern were it not that new construction had lagged sales for years, making this catchup long overdue. Between 2015 and 2020, for instance, sales increased 10.4% a year while starts rose only 4.1% a year. There actually would seem to be some more catching up left to do, though things appear to be coming into balance.
To be sure, sales and starts have outpaced new family formation, which has expanded less than 1.0% a year, but new families are only part of the housing equation. Sales and especially construction also must account for the depreciation of the existing housing stock. This is a figure often debated among those who see it as their job to understand such things. A lot depends on what the observer considers unlivable, but a consensus seems to have settled on an estimate that 3% of the existing housing stock loses its appeal each year. That means new construction, in addition to meeting requirements of new families, must also replace a considerable number or obsolete structures. What is more, the population is clearly shifting where it wants to live. The move south and west has been going on for decades and has no doubt accelerated in the pandemic. However useful a structure in an unattractive region, it cannot be moved, and meanwhile, someone needs to buy and build in an attractive region.
Boston Luxury Real Estate Market Remains Strong Despite Turmoil