The American dream of homeownership seems to be retreating further from reach for many, with new findings by the National Association of Home Builders (NAHB) revealing that both single-family and multifamily construction are stalling out nationwide. According to the latest Home Building Geography Index (HBGI) for Q2 2023, the most pronounced slowdown is being felt in large metropolitan areas.
“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,” said NAHB Chairman Alicia Huey, a developer from Alabama. “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 added, “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.”
The HBGI, a quarterly indicator of construction conditions across the country, uses county-level data to assess growth in various regions. According to the latest figures, the most severe contraction happened in large metro core counties, where single-family construction shrank by 24.8% year-over-year in Q2 2023. Large and small metro areas experienced double-digit negative growth rates, while rural markets fared slightly better with single-digit declines.
In a troubling revelation, the total market share for large metro areas in single-family building has plummeted to a record low of 49.8%. This shift is especially concerning given that these areas have declined for seven consecutive quarters before stabilizing this year.
The second quarter HBGI also offers a breakdown of market shares in single-family home building:
- 15.8% in large metro core counties
- 24.6% in large metro suburban counties
- 9.4% in large metro outlying counties
- 28.5% in small metro core counties
- 9.9% in small metro outlying areas
- 7.2% in micro counties
- 4.5% in non-metro/micro counties
In the multifamily sector, only three markets posted positive growth rates:
- 26.6% in non-metro/micro counties
- 15.9% in large metro outlying counties
- 3.1% in micro counties
Large metro core counties continue to languish at the other end of the spectrum, recording a -10.6% growth rate for the third straight quarter.
The landscape for multifamily construction also reflects shifting priorities. The market share in large metro core counties has dropped from 42.2% in Q1 2020 to 37.4% in Q2 2023. This marks the third consecutive quarter where this geographic area registered the lowest growth rate.
These recent trends suggest a fundamental rethinking is underway in how and where Americans choose to live, fueled by economic pressures and perhaps other factors still to be fully understood.
