In the wake of the COVID-19 pandemic, the U.S. housing market has faced increased home prices and rising rents, putting pressure on homebuyers and renters. Despite cooling demand and slight price drops, the housing market still faces a significant shortage of new homes. Iowa ranks 21st among states building the most homes in 2023, but new housing authorizations nationwide have fallen by nearly 25% since January 2022. Higher construction costs and mortgage rates continue to slow homebuilding efforts, as the U.S. struggles to address its housing supply gap.

Iowa Ranks 21st in U.S. Home Construction Amidst Housing Shortage

As the U.S. housing market recovers from the disruptions caused by the COVID-19 pandemic, states like Iowa are playing a crucial role in addressing the ongoing housing shortage. According to a recent analysis, Iowa ranks 21st among states building the most homes in 2023. However, despite efforts to increase housing supply, elevated real estate values and rents continue to stretch budgets for both buyers and renters.

A Cooling Market, but Supply Challenges Persist

Since 2022, the Federal Reserve has raised interest rates to combat inflation, leading to a slowdown in the housing market. By Q2 2024, the median home sale price had fallen by 6.8% from its peak in late 2022. Despite this, the housing market remains strained by a lack of available inventory, with existing home listings still below pre-pandemic levels, according to data from Freddie Mac.

Although the U.S. saw a 19% increase in existing home inventory year-over-year, new home construction has lagged due to rising mortgage rates and construction costs. The National Association of Home Builders’ (NAHB) Housing Market Index, a measure of builder confidence, fell to 43 in June 2024, reflecting the challenges faced by the construction industry.

Underinvestment in Housing Since the Great Recession

The U.S. housing market has struggled with a supply shortage ever since the 2008 financial crisis. Although new housing authorizations typically dip during economic downturns, the collapse of the housing market in the mid-2000s led to a sharp decline in building permits, from which the industry has been slow to recover. As of June 2024, new housing authorizations had fallen nearly 25% from their peak in early 2022.

COVID-19’s Impact on Home Construction

The construction industry has faced additional hurdles since the pandemic, with worker shortages, disrupted supply chains, and rising material costs all contributing to lengthy delays in new home construction. Single-family homes, in particular, have seen significant delays from start to completion compared to pre-pandemic times.

Housing Permits by State

While many states face similar challenges, some are progressing faster than others in authorizing new construction. Fast-growing regions like the Mountain West and the Sun Belt—including Utah, Idaho, Florida, and the Carolinas—are leading the way in new housing development. Major metro areas in these states have also shown rapid growth in new home construction, according to data from the U.S. Census Bureau and Zillow.

This analysis, conducted by Construction Coverage, used U.S. Census Bureau and housing data to rank states by the number of new housing units authorized per 1,000 existing homes in 2023.

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