If it feels like you’re seeing new construction homes pop up everywhere, you’re not wrong. Builders have been busy — and that’s making some people wonder:
Are we overbuilding like we did right before the 2008 housing crash?
The short answer: No.
Even though it may look like a building boom, the data tells a different story. Builders aren’t racing ahead — they’re actually starting to slow down intentionally.
Builders Are Pulling Back, Not Piling On
Permits (applications to start building new homes) are one of the best early indicators for what’s next for home construction. And right now, building permits are trending down, not up.
Here’s why that’s so important.
In the years before the housing crash of 2008, builders really ramped up their production of single-family homes (the red arrow in the graph below). And unfortunately, they built far more homes than the market actually needed. That oversupply led to falling home prices.
That’s what so many people remember, and what they worry will happen again.
But while construction has been picking back up since roughly 2012, we’re not headed for a repeat of the same mistakes.
The latest data available shows builders are actually starting construction on fewer homes right now (the green arrow in the graph below):
New data from the National Association of Home Builders (NAHB) confirms that trend. It shows that single-family building permits have fallen for eight straight months.
The Slowdown Isn’t Random, It’s Intentional
Basically, builders are watching and reacting to today’s economic conditions and buyer demand in real time. And they’re pumping the brakes on their pipelines to avoid getting caught with too much unsold inventory.
As Ali Wolf, Chief Economist at Zonda, says:
“. . . builders are still working through their backlog of inventory but are more cautious with new starts.”
That’s a big contrast to what happened before the housing crash, when overconfidence led to record-breaking levels of new home construction – even as demand was dropping. Today’s builders aren’t overconfident. They’re listening to the market and adjusting before things get out of balance.
The Regional Picture Tells the Same Story
And while inventory is going to vary a lot based on where you live, if you zoom out and look at regional data, the pattern holds almost everywhere (see graph below):
NAHB reports single-family permits are down in nearly every part of the country, with just one region showing a slight uptick. And even there, the growth is so small, it’s practically flat.
Why This Isn’t 2008 All Over Again
Before the 2008 crash, builders continued to build long after demand dropped — and that led to an oversupply of homes and falling prices.
Now, we’re seeing the opposite. Builders are slowing down early, and that’s a good sign.
Although more new homes are available today, the U.S. housing market still faces a shortage, despite years of underbuilding. Builders are simply catching up, not flooding the market.
So, when you see new construction signs around your area — especially in cities like Chicago — it’s not cause for concern. It means buyers finally have more options, and the market is balancing itself naturally.
Learn More About New Construction Homes in Chicago
Seeing more new homes for sale doesn’t mean builders are overdoing it. Since building permits have declined for months, this isn’t an out-of-control boom — it’s a measured recovery.
If you’re curious about what builders are doing in and around Chicago, let’s talk. Our real estate experts can explain what’s happening locally and help you explore new construction homes that fit your goals.
- KM Realty Group LLC
- 111 N Wabash Ave #1734, Chicago, IL 60602
- (312) 283-0794
