In 2020, new housing construction shifted away from the state’s biggest metros. With that said, residential construction continues to drive the economic recovery, both nationally and here in Virginia. The strength in the residential sector in the Commonwealth has been led by a surge in new single-family home construction outside of Virginia’s largest metropolitan areas.
In November 2020, there was a total of 2,521 permits issued for the construction of new housing units statewide in Virginia. The number of building permits was up 10.2% compared to October and reflects an increase of 16.2% compared to November 2019.
Despite the on-going pandemic and the 2020 economic recession, new housing construction remained a bright spot. Year-to-date (through November), there has been a total of 31,213 permits issued for the construction of new housing units, which is up 1.1% compared to the same period last year.
While multifamily construction experienced a boost in November, with multifamily permits up by nearly 300% from October, overall, 2020 has been characterized by a resurgence in the single-family new build market. Over the January through November 2019 period, permits for the construction of single-family homes accounted for 64% of all permits issued. In 2020, single-family homes comprised 71% of the new residential construction permitted in Virginia. Compared to 2019, permits for new multifamily units are down 18.8% in 2020 while single-family permits are up 12.3%.
Strong construction activity in the single-family market reflects demand not only for larger homes, but also interest in homes in smaller suburban and rural markets. In Virginia, the pace of new housing construction has been much faster in smaller markets than it has been in the state’s four largest metropolitan areas.
In Northern Virginia, there has been a total of 8,404 permits issued for new housing units in 2020, which is down 37.0% compared to the number of permits issued in 2019. There were 7,258 permits issued in the Richmond metro area in 2020, down 4.8% compared to last year.
While the numbers of permits issued for new housing construction were up in both the Hampton Roads and Charlottesville regions, the surge in new construction outside of the metro areas far surpassed the growth those areas. In 2020, there have been 8,290 permits issued for the construction of new homes in Virginia in places outside of the Northern Virginia, Richmond, Hampton Roads, and Charlottesville regions. By comparison, there were just 3,462 permits issued outside of these four regions in 2019.
New home construction has been a key driver of the state’s economy during 2020. And while the increase in new construction activity is definitely a positive trend, the number of new homes being built is still far below what is needed to meet demand and ease some of the challenges of very low inventory in the State.
Here are some key residential construction trends to look for in 2021:
• Virginia REALTORS® forecasts suggest that new home construction will continue to be strong in 2021, with an expectation that there will be nearly 38,000 homes permitted for construction statewide, an 8.9% increase over the 2020 total.
• Construction in smaller suburban and rural markets likely will continue to outpace construction in more urban areas. Multifamily construction activity will be relatively slow, particularly in the state’s most densely-populated markets, where there have been some rent declines.
• Home sizes will continue to rise slightly in 2021 to meet the demand from homebuyers for larger homes with home offices and more space.
• The biggest constraints to new home construction in 2021 will be the costs and availability of lumber and other building materials, as well as a lack of construction labor, not enough building lots in places where there is demand, and local regulations that add to the timeline and costs of new housing construction.