According to the latest findings from the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for the second quarter of 2023, large metro markets across the nation have experienced the biggest slowdown in single-family construction due to rising mortgage rates and higher costs to build. In addition, multifamily market growth also fell in most areas of the country.
“While the pace of single-family construction posted a year-to-year decline in all the small and large geographic markets measured by the HBGI between the second quarter of 2022 and 2023, we expect these levels have bottomed out,” says NAHB Chairman Alicia Huey. “Single-family production should register growth in the months ahead as the Federal Reserve nears the end of its tightening cycle and mortgage rates begin to stabilize.”
NAHB Chief Economist Robert Dietz adds: “The latest HBGI data continue to show a changing geography for home construction. Multifamily and single-family construction have shifted to lower-density markets. This is especially true for apartment construction, which has seen a segment share decline for large metro areas as development shifts to the suburbs and exurbs.”
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 lowest single-family year-over-year growth rates in the second quarter of 2023 occurred in large metro core counties, which posted a 24.8% decline. All large and small metro areas also had double-digit negative growth rates, while rural markets (defined as micro counties and non-metro counties) recorded negative growth rates in the single digits.
As single-family building levels have declined, the most pronounced drop-off has been in the combined market share of large metro areas (defined as core, suburban outlying). The total market share for these areas is 49.8% – a data series low – after falling for seven consecutive quarters prior to remaining unchanged from the first quarter of 2023.
Meanwhile, large metro core counties posted the lowest multifamily production growth rate of any market at -10.6%. This marks the third consecutive quarter where this geographic area registered the lowest growth rate.
In terms of market share in the multifamily arena, the large metro core counties fell from 42.2% in the first quarter of 2020 before the pandemic hit to 37.4% in the second quarter of 2023.
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