Home Construction Softening in Major Manufacturing Zones

Washington, DC, August 28, 2019-In a possible sign of economic softening in the industrial heartland, home construction in the nation’s major manufacturing areas registered declines on a year-over-year basis in the second quarter of 2019, according to the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI). 

When the manufacturing sector was exhibiting stronger growth in 2017, the rate of home construction in counties with relatively high shares of local manufacturing employment outpaced the rest of the nation.

“The HBGI data show that the manufacturing sector of the economy has been gradually losing steam since 2017, and there has been a corresponding drop in new home construction in counties where manufacturing employment is most concentrated,” said NAHB chief economist Robert Dietz. “This correlation indicates that as housing goes, so goes the economy.”

The second quarterly release of the HBGI focuses on the housing markets in the top manufacturing counties, which represent 10% of the nation’s single-family production output and 6% to 7% of multifamily construction.

Home building in these areas posted a decline in the first half of 2019, and second quarter data reveal that single- and multifamily construction decreased by 3.8% and 4.1%, respectively, on a year-over-year basis.

Other notable findings in the second quarter HBGI reveal that single-family construction in rural areas and exurbs are flat, while there are noticeable declines in other regions, particularly large metro suburbs.

“The analysis of the NAHB geographic tracking of home construction trends is a reminder of the challenges that the housing affordability crisis presents for larger markets, where a dearth of buildable lots and stricter zoning regulations are putting upward pressure on home prices,” said NAHB chairman Greg Ugalde, a home builder and developer from Torrington, Connecticut.

The HBGI also found that apartment construction continues to decline in large metro core and large metro suburban areas. Growth in apartment construction, however, is present in exurban, small metro and more rural areas.