Single-family home building slowed across the country during the second quarter of 2023, thanks to higher mortgage rates, and labor and supply shortages, according to the National Association of Home Builder’s (NAHB) Home Building Geography Index.
The HBGI is a quarterly measurement of building conditions across the county. It uses county-level data for single and multi-family permits to gauge housing construction growth in both urban and rural metros.
“The latest HBGI data continue to show a changing geography for home construction,” Robert Dietz, the NAHB’s chief economist, said in a statement. “Multifamily and single-family construction have shifted to lower-density markets, with market share gains for those types of 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.”
Large metro core counties posted the lowest annual single-family home building growth rate at -24.8%. All large and small metro areas reported double-digit negative growth rates, while rural markets (defined as micro counties and non-metro counties) recorded single-digit negative growth rates.
The share of single-family building has declined most notably in large metro areas (defined as core, suburban outlying), with these areas representing just 49.8% of all single-family building in the quarter. This share is a data series low, and it comes after seven consecutive quarters of decline. Single-family building in small metro core and outlying counties represented 38.4% of all building during the quarter, while 11.7% of single-family building occurred in micro and non-metro/micro counties during Q2.
Despite the declines, over the past four years, rural markets have shown resilience, as the single-family home building market share has risen from 9.4% at the end of 2019 to 12% earlier in 2023.
Alicia Huey, the NAHB chairman, also believes that single-family construction has bottomed out.
“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,” Huey said.
In the second quarter of 2023, the multifamily sector reported positive annual growth rates in just three markets, rising 26.6% in non-metro/micro counties, 15.9% in large metro outlying counties and 3.1% in micro counties. Large metro core counties reported the lowest multifamily production growth rate, with a yearly drop of 10.6%. This is the third quarter in a row where this geographic area posted the lowest year-over-year growth rate. Since the start of the pandemic in Q1 2020, the market share of multifamily building in large metro counties has fallen from 42.2% to 37.4% in Q2 2023.
After rising for the first seventh months of the year, homebuilder confidence declined in August, dropping six points from July to a reading of 50, as builders cited rising mortgage rates and a shortage of construction workers for reasons for the decline.