When the residential construction industry was turned away at the door this spring, shut down by gubernatorial mandate in many states across the nation due to the pandemic, everybody expected real estate development numbers to drop, but only one state in the nation fared worse than Michigan as the Great Lakes State watched the market plummet by more than two-thirds from a year ago.
As Michigan, like many states, halted or limited construction work, it was inevitable there would be a downturn and now we’re seeing the data. While real estate development is beginning to resume, recently released numbers from the U.S. Census Bureau show an unprecedented drop in residential building permits comparing April of this year to April of 2019. Nationally, there was a 20-percent decline in new housing units authorized by building permits, a drop that represents nearly $4.4 billion in value. Michigan alone dropped by 64.3-percent in that year-over-year comparison.
According to the New Residential Construction Report, COVID-19 negatively affected all stages of housing construction, but new building permit authorizations and housing starts fell further than completions of existing projects. At the national level, both new building permits and housing starts decreased to their lowest levels in half a decade.
A dramatic decline in new housing unit authorizations now indicates that there will be a prolonged slowdown in new home construction in the coming months—the average time between permit issue and the start of construction is about 1-2 months. It remains uncertain how long it will take new housing authorizations to reach their pre-COVID levels.
While the construction industry has been hit hard nationally, certain parts of the country have been impacted more than others. The Northeast is experiencing the sharpest drop in residential construction, with a 52.2-percent decline in permits and a 51.8-percent decline in the estimated value represented by those permits comparing April 2020 to April 2019. Construction in the South, on the other hand, only dropped slightly. New housing units authorized by building permits in the South decreased 7.6-percent year-over-year, with a drop in value of only 5.3-percent.
At the state level, New York experienced the sharpest drop in residential building permits year-over-year, at 71.3-percent, followed closely by Michigan’s 64.3-percent freefall. Construction in Pennsylvania and Illinois was also hit particularly hard. On the other hand, 14 states actually saw an increase in the number of new housing units authorized by building permits over the same time period. Many of those states, like Alabama, Arkansas, Maine, Mississippi, North Dakota, and West Virginia are Southern or have large rural populations.
To find which states are experiencing the biggest drop in new home construction, researchers at Construction Coverage, a review website for construction management software and commercial truck insurance, analyzed data from the U.S. Census Bureau Building Permits Survey. They compared the number of new housing units authorized by building permits in April 2020 and April 2019. This year-over-year percentage change in permits was used to calculate the rankings.
The analysis found that Michigan authorized 727 building permits for new residential units in April of 2020, representing a 64.3-percent decline compared to last year. Of all states, Michigan had the 2nd sharpest decline in new residential building permits in the U.S. Here is a summary of the data for Michigan:
- Change in new residential units authorized by building permits: down by 64.3-percent
- Units authorized in April 2020: 727
- Units authorized in April 2019: 2,035
- Change in value: -$281,269,000
For reference, here are the statistics for the entire United States:
- Change in new residential units authorized by building permits: -20.0-percent
- Units authorized in April 2020: 96,900
- Units authorized in April 2019: 121,200
- Change in value: -$4,358,061,000
For more information, a detailed methodology, and complete results for all states, you can find the original report on Construction Coverage’s website:
https://constructioncoverage.com/research/drop-in-construction-covid-19
