Nationally, new residential construction continued to climb in September 2020, with the sharpest increase being in new single-family construction, much like how single-family construction is booming in Virginia. Strong demand for homeownership has been supported by historically low mortgage rates and has continued unabated through the recession. The appeal of single-family homes—as opposed to multifamily apartments and condominiums—has grown during the pandemic. A shift to more working from home and concerns about the prevalence of COVID-19 cases in more urban areas has fueled a shift in demand for homes in rural and suburban markets, as well as larger single-family homes.
New residential construction is also on the rise in Virginia and also has been skewing toward single-family homes over the past few months. In September 2020, there was a total of 3,028 permits issued for the construction of new housing units in Virginia, which is an increase of 26% over the number of permits issued in September 2019.
Single-family construction has driven the increase in new construction activity. In September, the number of permits issued for single-family homes accounted for more than 70% of all permits issued. Over the third quarter of 2020, when the total number of residential building permits was up by 3% compared to a year ago, permits for new single-family construction surged 15%. (Permits for multifamily housing units were down 16% compared to the third quarter of 2019.)
Over the period of January through September, there were 26,548 permits issued for new housing units in Virginia, which is up 3% from 2019. Year-to-date, about 78% of permits for new residential units were issued in the state’s largest metropolitan areas (i.e., Northern Virginia, Richmond, Hampton Roads, and Charlottesville.) By contrast, in the first nine months of 2019, more than 91% of residential building permit activity was in these large urban areas. New home construction has been shifting to more exurban and rural areas of the state.
During January through September 2020, the number of residential building permits issued in Northern Virginia was down 24% compared to the same period last year. In the Richmond metro area, permits for new housing construction was down by 12% compared to a year ago. Building permits were up by 15% and 3% in the Hampton Roads and Charlottesville areas, respectively. However, the number of residential building permits surged by more than 150% in 2020 outside of these four metro areas.
Despite the increase in new single-family construction, there is still a significant inventory shortage in Virginia. In August, the number of single-family homes available for sale statewide was 42.2% lower than a year earlier. There are no signs that the inventory of homes for sale will increase in the near-term. Homeowners are remaining in their homes longer and low mortgage rates have fueled a refinancing boom which will only lengthen homeowners’ tenure. A significant increase in new residential construction is the only way inventory pressures will be eased in the near-term.