Home builders are expanding their outreach into lower density areas of the country, where the demand for more affordable housing has grown in recent years, and local zoning laws are less restrictive.
The National Association of Home Builders (NAHB) just released its Home Building Geography Index (HBGI) for Q3 2024, which offered a wider scope of U.S. housing trends from a historical perspective.
Small Towns, New Homes
More residential construction is occurring outside of urban centers, the data indicates, due to the continued lack of buildable lots, higher home building costs and an ongoing shortage of construction workers. Single-family construction continued to show growth across most HBGI geographic areas in the third quarter, albeit at a slower rate than compared to the same time period last year, even as mortgage rates remained high.
“The trend of construction expansion in lower density areas occurred prior to and during the Covid pandemic,” NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. pointed out. “Many households chose to move out of areas where population density was highest to take advantage of additional telecommuting flexibility and the ability to purchase larger homes in areas of the country where housing is more affordable.”
Currently about half of the U.S. population lives in the top 10% of the nation’s highest-density areas. Market share for new home construction in these locales fell from approximately 40% to 36% since the beginning of 2018, the NAHB reported. Between Q1 2020 and Q1 2022, the market share of new single-family construction declined to 35.5%. Since then it has remained fairly constant in high density areas, hovering around 35.7% in the third quarter of this year.
Construction Spending
Residential U.S. construction spending rose to a seasonally adjusted annual rate of $934 billion in October, 1.5% above September’s revised estimate of $920.3 billion. This is according to the U.S. Census’ current index, released Monday.
Battling high costs for materials and labor due to inflationary and market pressures, home builders have lobbied for more lenient federal, state and local laws governing construction.
“Regulations and NIMBY policies create significant headwinds for builders to construct affordable housing in urban centers, which has created this shift in residential construction to low density areas,” NAHB Chief Economist Robert Dietz explained.
Market Shares
Home builders are however – encouraged by Republican’s sweep of the U.S. election, and are expecting significant regulatory relief with the upcoming change in administration.
They are looking forward to a busier 2025, with homebuilder sentiment rising across the country.
Market shares in single-family home building for Q3 ‘24 include 16.1% in large metro core counties; 24.9% in large metro suburban counties; 9.4% in large metro outlying counties, 29% in small metro core counties; 10% in small metro outlying areas; 6.4% in micro counties, and 4.2% in non-metro/micro counties.
