Fastest home building activity continues in suburbs

Washington, DC – Housing continued to shift towards the suburbs and lower-cost markets, and this trend is especially pronounced within the multifamily sector, according to the latest Home Building Geography Index (HBGI) released today by the National Association of Home Builders (NAHB).

In the second quarter of 2021, multi-family construction posted double-digit percentage gains in small metropolitan and suburban areas, while large metropolitan areas showed a decline in multi-family construction activity.

“The trend of construction shifting from densely populated metro areas to more affordable regions, which accelerated at the start of the pandemic early last year, appears to be continuing,” said NAHB Chairman Chuck Fowke. “Lower land and labor costs and lower regulatory pressure in suburban and suburban markets make it more attractive to build in these communities. And workers are increasingly moving to these areas because of extensive telecommuting practices and lower housing costs.”

The HBGI shows that multi-family home construction grew 14.3% in small urban centers in the second quarter and 25.5% in small urban suburbs. In contrast, major urban core areas registered a 0.5% decrease.

“There has been a marked increase in new apartment construction outside major metro areas as people have more flexibility to live and work in more affordable markets,” said NAHB chief economist Robert Dietz. “As for the single-family sector, the HBGI data showed that construction growth also occurred more proportionally in these more affordable areas, while market share declined in the most expensive provinces. However, the number of single-family homes has slowed in recent months, mainly due to rising prices and limited availability of a wide range of key building materials.”

In the second quarter, HBGI also examined the correlation between construction activity and housing affordability. Findings show that since the start of the pandemic, multi-family housing growth has been flat in the most expensive housing markets and stronger in more affordable areas. In the segment defined as the “most affordable” regions of the country, multi-family construction grew by 48.3% since the second quarter of 2020.

Single-family housing construction has also seen a shift towards more affordable markets, although not as pronounced as multi-family housing. Suburbs and suburbs of medium-sized cities accounted for 18.1% of single-family construction in the second quarter – a market share gain of 0.8 percentage points since the fourth quarter of 2019. And while the majority (45.8%) of single-family homes in core areas of large and medium-sized metros was built, that share fell by 1.2 percentage points in that period.

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