The pandemic, starting in early 2020 was a significant inflection point in the housing market. Prices started skyrocketing shortly thereafter and builders had to scramble to patch holes in the supply chain and labor shortages to match the gigantic sudden increase in demand. Despite the proliferation of media narratives, there hasn't been much hard data about how people actually changed their preferences for what kind of house they wanted to build until now.
Last week, the US census bureau (belatedly) released the 2021 data for their annual Characteristics of New Housing survey. We sifted through the microdata to see the impact on the trends in construction over the past few years, comparing 2019 (pre-pandemic) to 2020 & 2021 (averaged).
Type of Construction Method:The survey breaks construction method into three categories: site-built, modular and other. While there was undeniably significant media attention paid to modular housing, it didn't seem to move the needle at all. In 2019 97% of all housing in the US were stick-built on site and only 1% we're modular. That did not change in 2020-2021.
Conclusion:
I'd speculate that both the negative stigma against modular housing, and high prices contributed to this outcome.
Type of Framing:The survey collects data on houses built across three categories of framing; wood, steel and concrete. With skyrocketing (and still highly elevated) lumber prices, many people looked into building with wood alternatives like, steel, concrete/ICF. There was many claims that ICF was finally cheaper to build with than wood.
Shockingly, wood actually gained market share across the pandemic period, averaging 90% of all builds in 2019 and increasing to 91.5% in 2021-2022. Steel gained slightly but most of the lost market share was in concrete (which also suffered pandemic related shortages).
Conclusion:
Wood is cheap to build with. It's easily workable, lightweight and sustainable. Plus the entire construction labor industry has a shared base of knowledge centered on wood framing. So even if it doubles in price, it's hard to justify making a switch.
Type of Construction Financing:
The survey collected data on new construction financing across 6 popular categories:
|
Type of Financing |
2019 (% of total) | 2020-2021 (% of total) |
|
For Rent |
6% |
5.5% |
|
For Sale; Not Yet Sold |
7% | 2.5% |
|
Conventional |
62% | 65% |
|
FHA Insured |
12% | 13.5% |
|
VA Guaranteed |
5% | 5.5% |
|
Cash |
9% | 8% |
Conclusion:
Not a ton of surprises here. The biggest relative mover was 'For Sale; Not Yet Sold' which obviously declined because builders built up long wait lists for homes before even starting construction.
Construction Duration:
There were widespread reports in the media that contractors were commonly left with half finished homes, waiting on the supply chain for critical components, like windows, to catch up.
| Construction Duration | 2019 (% of total) | 2020-2021 (% of total) |
| 3 months or less | 14% | 12.5% |
| 4 to 6 months | 47% | 50.5% |
| 7 to 9 months | 21% | 21.5% |
| 10 to 12 months | 9% | 7% |
| 13 months or more | 9% | 8.5% |
Conclusion:
While the data does not allow us to compare the change in the exact duration of construction, this narrative does not seem to hold up. There was a very small shift in the curve, where 1-3% of houses took about 2 months longer than normal to build. The effect was most pronounced in 2020, and the curve has further normalized in 2021.
Square Footage:
There was significant talk about people desiring larger houses as a result of the pandemic related shift in preferences.
| 2019 (% of Total) | 2021-2021 (% of Total) | |
| <1,400 SF | 7% | 7% |
| 1,400-1,799 SF | 17% | 17.5% |
| 1,800-2,399SF | 31% | 32% |
| 2,400-2,999SF | 21% | 21% |
| 3,000-3,999SF | 17% | 15.5% |
| >4,000SF | 8% | 7.5% |
Conclusion:
There actually wasn't a huge shift in consumer preference for housing size. I'd speculate that the higher prices meant that people had to make sacrifices on square footage which offset their preference for a larger home. In addition, much of the demand for more space was met by people sorting into households with fewer people.
Contract Price per SF:
Obviously, construction prices were the most talked about story of the past two years. But the survey has an unfortunate limitation, primarily focusing on price ranges that made more sense when the data was first collected in 2002. We don't get to see a very clear breakdown of higher price ranges.
| Contract Price | 2019 | 2021-2021 |
| <$80.00 /SF | 18% | 12.5% |
| $80.00-99.99 /SF | 17% | 13.5% |
| $100.00-124.99 /SF | 22% | 21% |
| $125.00-149.99 /SF | 17% | 18% |
| $150.00+ / SF | 26% | 35% |
Conclusion:
There was definitely a significant shift away from lower contract prices. The share of home construction contracts below $100/sf fell from 35% in 2019 to 26% in 2021-2022. That shift in pricing was reflected on the upper end where the share of houses built for more than $150/sf rose from 26% to 35%.
That being said, despite the horror stories of $400+/sf home quotes, 65% of all houses are still built for less than $150/SF.