New construction varies significantly by market

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As part of Parcl Labs' analysis last week, which looked at the regional housing markets most at risk of home price corrections, they measured the percentage of active inventory that is new construction.

For today’s ResiClub piece, we visualized that new construction data.

The visualization below highlights an important aspect of housing: Levels of new construction vary significantly by market.

The Parcl Labs new construction percentages—which were pulled via the Parcl Labs API—make sense. After all, many of the markets that ranked high, like Myrtle Beach, were the very places that saw notable jumps in housing permits during the Pandemic Housing Boom.

Over the weekend, Inc./Opening Bell Daily reached out to get my thoughts on homebuilder stocks—which since the start of 2024 have underperformed the S&P 500 Index.

Here’s what I told Inc./Opening Bell Daily: “Homebuilder stocks were one of the highest performing stocks last year, PulteGroup jumped 127% and D.R. Horton jumped 70% in 2023 as investors realized that homebuilders would do well despite spiked interest rates. Builders maintained profit margins above pre-pandemic levels in 2023 despite deploying more on incentives like buydowns. And homebuilders benefited from the fact that turnover in the resale market—builders biggest competition—is constrained by elevated interest rates. Fast-forward to 2024, and while builders stocks aren’t falling hard, there is no longer a bull rush into builder stocks. Interest rates have yet to come down much, and as rates stay higher for longer, active inventory in some markets has begun to tick up. Big builders I talk to—like KB Home CEO Jeff Mezger—haven’t yet seen an impact on [new home] sales in markets like Florida where active inventory is rising. For now, Wall Street is in wait and see mode with builders, waiting to see if rising inventory eventually causes builders to up their incentives, thus compressing margins.”

Zooming out, as the chart above shows, homebuilder stocks have outperformed the S&P 500 Index by a wide margin this decade.

Last week, ResiClub PRO members got these three additional research articles:

Diverging housing markets: 50 furthest below and 50 furthest above pre-pandemic inventory levels

25 states saw home insurance premiums spike over 10% last year

The Pandemic Housing Boom saw months of supply crater—it's slowly recovering