Top 5 Markets Where New Construction Will Crush It in 2024!

Investing in real estate is about finding the best places to put your money into. From small towns to sprawling urban cities, there are many different locations and types of properties you can place in your portfolio. Some of the best buildings to invest in are new construction homes. When buyer demand is high, builders try to construct as many homes as possible to meet demand. If you are considering adding these properties to your portfolio, this guide takes a closer look at five of the top markets for new construction in 2023 and 2024. 

Benefits of New Construction for Real Estate Market

There are many reasons why new construction is good for a neighborhood. More development in an area means more housing, transportation, jobs, and business. When new homes are built in a city or town, the value of nearby homes should increase. 

Even though property values are still exceedingly high in many locations throughout the U.S., demand for single-family homes hasn't dropped much. Since demand is still high, an influx of new construction shouldn't negatively impact property values in the vicinity. 

In many cases, new construction creates new housing demand. After people buy these properties, the demand for businesses increases as well, which gives a jolt to the economy. While the change in pricing depends on the number of homes available on the market, home values typically increase with new development. 

Understanding the Housing Industry

Since the COVID-19 pandemic started, the real estate industry has been in flux. When the Federal Reserve lowered interest rates in 2020, buyer and investor demand skyrocketed. As a result of the rapid increase in demand, home prices also rose. Over the past two years, interest rates have risen consistently and are now nearing historic highs. While buyer demand has dropped somewhat because of how expensive it is to purchase homes, demand is still high in many locations. 

The main reason why home values haven't dropped that much across the U.S. is because of the low housing supply. Throughout many states, there's a major shortage in the number of homes available on the market. As an investor, it's best to put your money into cities and towns that are experiencing increases in new construction and building permits. 

The primary cause of housing supply being low is a relative lack of investment in real estate since the Great Recession in 2008. While the rate of new construction usually falls when the economy worsens, these declines are often temporary. However, the damage caused by the Great Recession persisted for many years. 

It wasn't until late 2021 that new construction starts for a given month grew to more than 1.8 million. While new starts have dropped off somewhat, they are higher than they were before the COVID-19 pandemic. In fact, there are some markets where new construction is expected to soar throughout the remainder of 2023 and into 2024. 

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Why New Construction Is Rising Rapidly in Certain Markets

Many of the real estate trends that occurred in 2023 should continue into next year. While national trends paint an accurate picture of the overall real estate industry, they don't tell you which locations are ideal for investing. In some cities, home values are dropping even while new construction starts are low. The key to being a successful investor is finding cities with high inventory, ample new development, and increasing property values. 

The main cities that are experiencing high development are found in the Sun Belt, which is a region in the U.S. that has grown rapidly in popularity among investors over the past 10 years. Many of the locations in the Sun Belt provide residents with affordable living and warm weather. While home prices are still lower than the national average in these areas, they have spiked since the COVID-19 pandemic. 

Some of the states in the Sun Belt that are doing well in an uncertain real estate market include Florida, Arizona, Texas, North Carolina, and Georgia. Much of Southern California is also doing well. Since home prices are rising rapidly in the markets detailed below, there's an increased need for new homes. By building new homes, there's a hope that home values will start dropping. Before you choose a market to invest in, consider the advantages of each location as well as the latest market trends. 

Top 5 Markets for New Construction

While there are many markets in the Sun Belt where new housing starts should be high in the coming year, these five markets show the best potential. 

Austin, TX

Austin, TX is a mid-sized tech hub that's been highly appealing to investors and potential homeowners alike for more than two years. In fact, many cities in Texas are experiencing increasing property values, higher populations, and more housing starts. Now that tech companies are beginning to expand beyond Silicon Valley, cities like Austin are proving to be popular because of the combination of great infrastructure and a relatively affordable cost of living. Austin also provides a more relaxing quality of life that isn't always present in larger cities like NYC or San Francisco. 

Since an increasing number of tech businesses are also moving to Austin and nearby cities, the place is becoming more popular among Millennials who are searching for a good place to live and work. There are also numerous suburbs and smaller towns just outside of Austin that are proving to be highly sought after by people who are working in the city. Even though the Austin population is growing, the rate of new housing starts isn't climbing as fast. There's still a sizable scarcity of properties on the market in Austin. 

Based on data from the U.S. Census Bureau, more than 42,000 homes are built on a yearly basis in Austin. While cities like Houston and Dallas have more houses built annually, Austin has the highest rate of new housing units per 1,000 existing homes. In 2022, 42.5 new houses began construction per 1,000 existing homes. This is currently the highest rate in the U.S. Austin has also been at the top of this list since the COVID-19 pandemic began.

Check out our full overview of the Texas housing market! 

Raleigh, NC

Just like Charlotte, Raleigh is a highly popular city in North Carolina that's known for its great culture and strong economy as well as a low cost of living. It's expected that this area will experience a surge in new construction over the next 12 months. There are many reasons why Raleigh is appealing to investors, which include the following:

• An increasing population
• Great universities
• Reasonable real estate prices
• Healthy job market
• Growing tech industry
• Easy access to recreational activities
• Robust cultural scene

These factors make Raleigh an appealing location for real estate investors and construction crews alike. Just like Austin, new homes are being built in Raleigh because of the increase in population. When businesses move to Raleigh, more jobs are created. The people who take these jobs fuel the local economy and create a strong real estate market. 

Because of the higher demand for housing, new homes are being built as fast as possible. Investors can take advantage of the reasonable property prices and high housing starts to maximize their returns. In 2022, more than 21,000 homes were built in Raleigh, which marked a 5,000 increase from two years prior. More than 27% new housing units were authorized in 2022 than in 2020. Every factor that made Raleigh a great place to invest in 2020 is still present in the latter stages of 2023. 

Nashville, TN

Nashville is another metro area that has experienced a high increase in home values since the COVID-19 pandemic began. This city is known for its strong job market, which is why it has a consistently growing population. Since Tennessee doesn't have a state income tax, the cost of living in Nashville is much more affordable than what you would find in other large cities. 

In the Nashville metropolitan area, more than 28,000 new housing units were built in 2022, which was nearly 4% higher than the number of housing units built in 2020. Since the population is growing and real estate is relatively affordable, builders remain interested in constructing new properties in the coming year. In August 2023, more than 2,800 new housing units were authorized. New construction is often at its busiest in the spring and summer months.

Orlando, FL

Orlando, FL has long been a favorite among residents and tourists alike because of its excellent entertainment options. When combined with a strong economy and warm weather, Orlando is an appealing destination for investors and builders. 

There are many reasons why you should consider investing in the market, which include a low cost of living, great tourism industry, and growing job market. Since 2020, the population has increased by around 1.5%. Keep in mind that the average sale price for a single-family home in Orlando is below the national average, which is another reason why Orlando is a sought-after destination among investors. 

In 2020, around 24,500 new housing units were authorized. Two years later, that number increased to 28,682, which represents a 17% spike in new housing units. Many of the factors that are driving the city's popularity should remain in place for years to come, which is why you should seek investment opportunities in Orlando. 

Phoenix, AZ

Phoenix is another location in the Sun Belt that's popular among people who are leaving high cost-of-living areas like Seattle and Los Angeles. Phoenix offers affordable housing, ample investment opportunities, a growing population, high rental demand, and a strong economy. It also has proximity to many outdoor recreation spots, which include everything from the Sonoran Desert to North Mountain Park. Phoenix is considered a major transportation hub as well, which bodes well for the city's appeal among investors and new homeowners alike. 

More than 47,000 homes were authorized to be built in 2022 alone, which is right around the same number that were built in 2020. However, there have been even more new homes built throughout the city in 2023. For example, nearly 3,800 new homes were authorized in August 2023. In July, new housing starts were above 4,000. September numbers rose further with over 4,800 new housing starts. While data for the final three months is needed to provide a more precise comparison, it's clear that new construction is doing well in Phoenix. 

Having high new construction rates is great for practically everyone. Since property values are still high and the housing supply is extremely low, introducing new homes to the market isn't going to cause property values to plummet. However, finding a city with a high number of new housing starts should make it easier for you to identify investments that can provide your portfolio with a consistent ROI. If you're in search of a good place to invest in, start with the five markets detailed in this guide.