Large Urban Areas See A Decline In Single-Family Construction

Lenders  |  RE Agencies  |  Resources  |  Technology  |  Marketing  |  and more!

Large Urban Areas See A Decline In Single-Family Construction

Mar 21, 2023 | News | 0 comments

The fourth quarter of 2022 saw a cooling in the housing market, with homebuilders continuing to pull back on single-family construction. According to the National Association of Home Builder’s (NAHB) Home Builder’s Geography Index (HBGI), the year-over-year growth rate for single-family construction fell across all geographic areas.

Single-family construction in both large and small outlying metro areas experienced a significant decline over the past year, with large metro outlying counties seeing the biggest drop from 23.6% in Q4 2021 to -12.1% in Q4 2022, and small metro outlying counties falling from 19.6% growth in the previous year to -11.7%.

In the last quarter of 2022, there was a decline in single-family building in micro counties and non-metro/micro counties, falling from 19.6% and 26.5% in Q4 2021 to 6.8% and -1.0%, respectively. However, micro counties were the only type to show a yearly positive growth rate in Q4 2022 among all the geographic areas analyzed.

Although single-family homebuilding has experienced declines and negative yearly growth rates, metro core and suburban counties still have the biggest market shares in this sector, with small metro core counties accounting for 28.5% of projects, large metro suburban counties accounting for 24.7%, and large metro core counties accounting for 16.0%.

Multifamily construction has shown a different trend, as the annual growth rates for six out of the seven submarkets analyzed remained positive in Q4 2022, with growth rates around 15%. In Q4 2022, the yearly growth rate for multifamily construction in micro counties increased from 14.8% in Q4 2021 to 17.9%. However, the only exception was large metro core counties, where the growth rate was just 1.5%.

The decline in single-family construction growth rates is due to the COVID-19 pandemic and Federal Reserve policies. In contrast, the multifamily construction sector continued to experience growth in all submarkets analyzed, except for large metro core counties. The shift in buyer preferences to living outside densely populated areas has contributed to a decline in market shares for urban core markets of small and large metro areas. In contrast, rural markets have experienced growth in single-family market shares.