Ahh the smell of toxic offgassing in the morning. It’ll knock a couple months of your life but where would we be without new construction? Probably all living in tent city.
In the end like any market it comes down to supply and demand. We’ve discussed the disproportionate effect that out of town buyers have on the market as they create demand without adding to supply. Those buyers are balanced against the sellers moving away or dying. But of course there is a third factor and that is new construction. They ain’t making more land but they are making plenty of new little boxes to go on it.
So is construction going to ramp up to even out the market? Well builders tell me they are crazy busy and waiting for new land to become available to build on. Let’s take a look at the data.
Nothing too dramatic, although the units under construction in April seems to be ticking upwards. Might be starting to react to the market conditions and rising prices. Detached home construction is on a reasonably solid looking upward trend.
For perspective, let’s look a bit further back where we can see the condo boom we had just before the financial crisis.
At the peak in July 2008 there were 2616 condos under construction versus only 1379 now. No wonder condos languished longer than detached houses, that supply overhang took a few years to work its way through.
In fact – looking at the complete history – it seems specifically condo building booms often coincide with price tops. It happened in 1976, 1981, 1994, and 2008. So watch out when the builders start going crazy, it could be the top of the market.
Another way to look at it is what percentage of total stock is attached vs detached, which you can play with in the interactive version below.