Exurban Areas Continued to Lead in Homebuilding in Q3

Washington, DC, December 5, 2023-For the third consecutive quarter, single-family growth rates were negative for all geographic sectors of the nation, as exurban areas posted the largest increase in marketshare for both single-family and multifamily construction, according to the latest findings from the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for Q3 2023.

Exurbs exist at the edge of urban areas and are often prosperous with lower housing density.

“Rising mortgage rates, elevated construction costs and chronic construction labor shortages have led to negative quarterly growth rates in single-family home building for all geographic markets since the beginning of 2023,” said NAHB chairman Alicia Huey, a custom homebuilder and developer from Birmingham, Alabama. “Meanwhile, the HBGI report shows the multifamily sector continued to post strength in two geographic areas: large metro outlying counties posted a ninth consecutive quarter of positive growth while non-metro/micro counties registered positive growth for the 11th straight quarter.”

“The HBGI data continues to show that home building has slowed, but there are signs that it is beginning to turn a corner heading into the end of the year as the Federal Reserve has paused rate hikes as inflation continues to slow,” said NAHB chief economist Robert Dietz.

Dietz added that new analysis using personal income per capita estimates from the Bureau of Economic Analysis coincides with the geographic HBGI data which shows single-family and multifamily home construction has become more concentrated in outlying areas instead of urban centers. “Counties with higher incomes that tend to be more urban have lost home building market share in both the single-family and multifamily sectors,” he said.

The lowest single-family year-over-year growth rates in Q3 2023 occurred in small metro core counties, which posted a 18.6% decline. All large and small metro areas also had double-digit negative growth rates.

Meanwhile, large metro outlying counties posted the largest increase in single-family market share between Q2 and Q3 2023, rising from 9.5% to 9.7%.

Breaking down the seven metro and county areas, the third quarter HBGI shows the following marketshares in single-family homebuilding:

* 15.9% in large metro core counties

* 24.7% in large metro suburban counties

* 9.7% in large metro outlying counties

* 28.3% in small metro core counties

* 10.0% in small metro outlying areas

* 7.0% in micro counties

* 4.4% in non-metro/micro counties

In the multifamily sector, outlying counties had the highest growth rate in Q3, up a robust 37.9%.

On a personal income per capita analysis, the data shows that, not surprisingly, the majority of homebuilding occurs in in high income areas.

The single-family market share for counties with the highest personal income quintile (greater than $62,212), was 40.8% in Q3 2023. This share has fallen by 4.2 percentage points from the third quarter of 2018.

The multifamily market is even more heavily dominated by high income areas. In Q3 2023, 61.0% of all multifamily building was in counties that were in the highest income quintile. The multifamily market share for high income areas has fallen 4.8 percentage points over the past five years.