As the 2025 spring homebuying season begins, the national housing market continues to struggle with supply shortages. But increased activity in residential construction, particularly in the South, is helping to alleviate affordability challenges in certain regions, according to ananalysis from First American Financial Corp.
Housing supply has surged in the South, with more than half of the 1.5 million building permits issued in 2024 concentrated in the region, according to U.S. Census Bureau data. This construction boom is contributing to slower home-price appreciation and, in some cases, price declines.
“In the housing market, you can’t buy what’s not for sale,” said Sam Williamson, senior economist at First American. “With existing-home sales still near historic lows, new residential construction is playing a crucial role in expanding supply and keeping prices in check.”
Supply and pricing trends
The relationship between new-home construction and price trends is evident in many metro areas. Markets with increased construction activity tend to experience slower price growth — or even price declines — compared to areas with limited new supply, Williamson noted.
A recent First American analysis of the top 50 U.S. housing markets revealed that the number of permits issued per 1,000 households strongly correlates with home-price trends.
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In markets with robust building activity, such as Tampa, prices fell 3.8% year over year in February 2025 despite high demand. By contrast, in Pittsburgh, where fewer permits were issued, prices surged 10% during the same period.
“More homes mean more choices for buyers and less pressure on prices,” Williamson said. “The South, in particular, has seen an influx of construction due to favorable zoning laws, ample land availability, and relatively lower costs of living.”
Southern markets lead in construction growth
In 2024, 16 of the top 50 housing markets outpaced the national median in both new-home permits and price moderation. Ten of these 16 markets were located in the South, where new construction continues to expand inventory levels.
Tampa, for example, authorized 16 new housing units per 1,000 households — one of the highest rates in the nation, which helped to push home prices down. Other high-growth Southern metros — such as Raleigh and Nashville — are seeing similar trends, according to First American.
“The surge in homebuilding in these areas isn’t just about supply; it’s also about demand,” Williamson said. “People are moving to the South for its affordability and job opportunities, and builders are responding.”
Looking further into 2025
While rising mortgage rates and affordability concerns continue to impact buyers nationwide, increased construction in key regions is providing some relief. But supply growth remains uneven, and many markets still face significant housing shortages, Williamson said.
“As we enter the 2025 buying season, buyers in high-construction markets may find better deals than those in supply-constrained areas,” he said. “If building activity continues at this pace, it could help stabilize prices in the long run.
“However, this building surge has not been evenly distributed across the country. Over half of the permits, 53 percent or 803,000 units, issued in 2024 were in the South, more than double the number issued in any other Census region.”
Although the housing market remains highly localized, buyers looking for affordability could find themselves thankful for the construction boom in the South as it provides new opportunities in the months ahead.
