Single-family construction growth slowed considerably in large suburban markets during the first quarter of 2022, according to the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI), published Tuesday.
The index shows that the rate of year-over-year single-family construction growth slowed during the first three months of the year in small and large metro urban, suburban and rural regional submarkets. In contrast, multifamily construction growth in large population centers rebounded during the first quarter of 2022 from negative growth rates a year ago.
“As the year has progressed, we have seen signs of an increasing slowdown in the single-family market,” Jerry Konter, the NAHB chairman, said in a statement. “Ongoing building material production bottlenecks have delayed or stalled home building projects, construction labor shortages are running near an all-time high of 400,000 workers and more recently the rapid runup in mortgage rates have all combined to exacerbate the housing affordability crisis.”
According to the NAHB, the HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural geographies.
The report showed that average single-family growth rates in large metro suburban counties fell the most – from 18.7% a year ago to 5.2% during the first quarter of 2022. However, the growth rates in large metro core counties slowed only slightly, falling from 9.5% in Q1 2021 to 8.8% in Q1 2022. On the other hand, growth rates in micro counties (small towns) rose 3.9 percentage points from a year prior, to 16.7%.
During the first quarter of 2022, small metro core counties had the largest market share of single-family home building at 29.2%; followed by large metro suburban counties at 24.8%; outlying large and small metro areas at 18.8%; large metro core counties at 16.6%; and rural areas at 10.6%.
“Single-family growth rates have slowed in nearly all regional submarkets over the past year due primarily to rising construction costs that have seen building material costs rise 19% year-over-year,” Robert Dietz, the NAHB’s chief economist, said in a statement. “The more pronounced drop in growth for the large suburban markets is due to the easing of the rapid shift of home buyer preferences for the suburbs in the aftermath of the COVID-19 pandemic.”
Meanwhile, in the multifamily market, large metro core counties recovered from a negative growth rate of 3.6% during the first quarter of 2021 to a positive growth rate of 17.4% during the first quarter of 2022. Multifamily construction growth also rebounded in large metro suburban counties from a negative 9.5% growth rate to a positive 32.4% growth rate this year, while growth in low density counties recorded a year-over-year increase of 32.0 percentage points, posting a 37.0% growth rate in Q1 2022.
Overall, the HBGI found that 36.9% of multifamily development occurred within large metro core areas, 25.8% in large metro suburbs, 23.5% in small metro core areas, and 13.7% in other submarkets.
“Low rental vacancy rates and rising rents give multifamily developers confidence to continue building despite rising costs for land, labor and materials,” Dietz said.
