Top 10 Places to Build

Originally published by: Wall Street JournalNovember 26, 2012

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Housing construction has risen to its highest level in four years, the Census reported recently, in part a response to rising confidence among home builders, but also, as the Journal wrote this month, because household formation is beginning to pick up.

But if the Census numbers are any guide, most of these new households – students graduating from college, adult children moving out of their parents’ basements, singles moving into new homes as they get married – will move into rental apartments or condos rather than detached single-family homes.

Although construction of both homes and apartments is gaining steam, multifamily construction once again far outpaced single-family housing starts this month, in every U.S. region except California, where there are low inventories of single-family homes for sale.

Builders are rushing to figure out where to place their chips when it comes to starting new communities and putting shovels in the ground.

A new projection of household formation growth by geographic region, by market research firm Pitney Bowes Software, lays out which metro areas saw the most growth over the first decade of the 21st century, and which metro areas are projected to see the most growth over the next five years. (Pitney Bowes sells its projections and other data to retailers and other businesses looking to make strategic growth decisions.)

What they found is that while most of the top 20 places expected to grow fastest in the next five years are the same ones that grew the most last decade. But some of them reshuffled by a few places in the rankings, and there are a few surprises on the list.

Las Vegas, for example, is projected to fall from No. 7 on the list of biggest household count jumps from 2000 to 2010 to No. 23 over the next five years. Chicago is projected to fall from No. 13 to No. 22. New York, which saw a net household gain of just over 130,000 in the first decade of the century, putting it at No. 17 on the list, is expected to move up the list to No. 5 by adding 75,000 new households over the next five years.

Houston and Atlanta lead the list from both 2000 to 2010 and are expected to top it again for 2012 to 2017. Other areas set to continue seeing big gains are Dallas, Washington, Phoenix, Riverside-San Bernardino, Austin, Orlando, San Antonio and Charlotte. Just six of the top 50 projected growth markets are in the Northeast, the region that showed the weakest construction growth in the latest Census figures, while 16 of them are in the West, the region that has seen the most single-family construction growth.

If projections like these are right, they could be a helpful road map for builders.

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