The latest Homebuilding Geography Index (HBGI) from the National Association of Homebuilders (NAHB) found a slump in single-family home construction during Q1 2023. This is described as a consequence of high construction costs and interest rates since the height of the pandemic. However, the decline was less pronounced in low density markets.
- Large metro core counties, which posted a 25.6% 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.
- Over the past four years rural markets have exhibited particular strength. The rural single-family home building market share has increased from 9.4% at the end of 2019 to 12% by the first quarter of 2023.
- The first quarter HBGI shows the following market shares in single-family home building:
- 15.7% in large metro core counties.
- 24.5% in large metro suburban counties.
- 9.5% in large metro outlying counties.
- 28.6% in small metro core counties.
- 9.7% in small metro outlying areas.
- 7.5% in micro counties.
- 4.5% in non-metro/micro counties.
- In the multifamily sector, large metro outlying counties had the highest year-over-year growth rate in the first quarter of 2023, up 24.5%. Meanwhile, large metro core counties had the lowest growth rate at 3.2%. But in a sign that multifamily building is returning to densely populated areas, the market share for this sector increased by 0.8 percentage points to 37.5% between the fourth quarter of 2022 and first quarter of 2023.
“This latest data indicates that the pace of single-family construction in the first quarter of 2023 has slowed from pandemic-induced highs, but a turning point is coming into view with a rebound led particularly in more affordable, lower density areas,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Alabama. “And while many builders are having difficulties with labor shortages and tighter finance conditions, the multifamily building market remains strong with risks of slowing later this year.”
“Higher interest rates and construction costs, along with shortages of key materials such as transformers and concrete, have contributed to all single-family markets posting a negative year-over-year building growth rate, but this particularly true for the largest, densest metro areas,” said NAHB Chief Economist Robert Dietz.
For more information, visit https://www.nahb.org/.