Housing construction in the U.S. has reached levels not seen since the 1970s’ frenzy.

According to Census Bureau data, there are more new units under construction in buildings with at least five units than at any time in the past 50 years.

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Ever since remote work spawned an exodus from big cities, developers have been working overtime in high demand regions to catch up with demand.

With so much new housing flooding the market, the post-pandemic surge in rent costs may be coming to an end. Although it may take time for the supply to “hit home.”

Sun Belt growth underscores a construction boom

Apartment construction has been steadily nudging upward since 2010.

But the biggest catalyst exploded interest in the Sun Belt after the pandemic when people fled the high cost of cities like New York and San Francisco for cheaper homes and warmer weather.

A rental boom soon followed in Dallas, Las Vegas, Austin, Nashville, and other southern cities.

As the economy began to rebound from Covid, research in July 2021 by loan company Arbor, showed the Sun Belt accounted for almost 60% of new apartment investment in the U.S.

Developers doubled down on that trend, accelerating new building projects, which are all now hitting the market at the same time.

Americans, meanwhile, have settled down after the pandemic, realtors say, and aren’t looking to move again right now.

Supply catches up

Economists previously argued that so-called “Zoom Towns” were well equipped to create the cheap housing stock needed to absorb remote workers from major cities

A combination of cheaper land and less red tape made it super attractive for developers to build there. And once housing supply catches up with demand, rents are predicted to fall.

“Even though remote work has increased rents in the short-run, they are likely to decline going forward and in the long-run may end up lower than pre-pandemic,” the Economic Innovation Group wrote in a November 2022 paper.

Conditions in the current construction boom can’t be directly compared to the roaring 70s.

There was no homeless problem at that time, and significant government funding went toward public housing.

It wasn’t until later in the decade, after all the easily developable land had been exhausted, that attention turned toward more dense projects, changing the face of the market.

Can construction continue to rise?

While the trend in apartment construction is firmly upward, the housing market will dictate its future prospects.

If the economy slides into recession, with higher interest rates creating an affordability issue for mortgage payments, it could mean that a fall in house prices will follow.

And if house prices fall, this extended wave of construction activity could still come crashing down, just as it collapsed after the financial crisis.

It’s something that investors with exposure to the property and house-building sectors will be watching closely.