Residential Real Estate News
Home Builders Shift Toward Smaller U.S. Markets Continues
Based on the National Association of Home Builders latest Home Building Geography Index, there has been a shift in home building activity over the past 30 months, with notable slowing in large, metro urban areas as a result of initial Covid migration effects followed by declines in housing affordability in high-cost and highly regulated markets as interest rates increased.
"The geography of home building has shifted over the last two and half years, with more single-family and multifamily construction occurring in lower density markets," said NAHB Chief Economist Robert Dietz. "This shift was first caused by the initial impact of Covid on housing demand, which favored lower density neighborhoods. The shift continued in recent months due to housing affordability conditions that are causing both prospective renters and buyers to expand their geographic search for housing, aided by hybrid work patterns that allow for a combination of remote and office work."
"Looking at the last 12 months, single-family production has slowed in all regional submarkets, both large and small, due to ongoing building material production bottlenecks, construction labor shortages, and the Federal Reserve's tightening monetary policy," said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga.
The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural geographies.
The index shows that the market share for single-family home building in large metro core and inner suburbs has fallen from 44.5% to 41.6% from the fourth quarter of 2019 (pre-Covid) to the second quarter of 2022.
In contrast, single-family home building in outer suburbs in large and medium sized metros has expanded from 17.4% to 19% during the same period.
This decentralized trend holds true in the least densely populated regional markets. From the fourth quarter of 2019 to the second quarter of 2022, single-family home building market share in small metro core counties increased to 29% from 28.8%. In rural areas, which represent non-metro/micro counties, the home building share rose to 10.4% from 9.4%.
Meanwhile, the multifamily market showed a similar pattern over the same time frame. The market share of multifamily construction in large metro core areas fell from 41.7% in the fourth quarter of 2019 to 39.3% in the second quarter of 2022.
