Exurban Areas Experience Largest Growth in Home Construction
According to the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for the third quarter of 2023, exurban areas saw the largest increase in market share for both single-family and multifamily construction. This marks the third consecutive quarter where single-family growth rates were negative for all geographic sectors of the nation.
Challenges in the Housing Market
NAHB Chairman Alicia Huey cites rising mortgage rates, elevated construction costs, and chronic construction labor shortages as factors contributing to the negative quarterly growth rates in single-family home building across all geographic markets since the beginning of 2023. However, she also points out that the multifamily sector continues to show strength in two geographic areas: large metro outlying counties (exurbs) and non-metro/micro counties.
Turning a Corner?
NAHB Chief Economist Robert Dietz suggests that while the HBGI data continues to show a slowdown in home building, there are signs that it may begin to turn a corner towards the end of the year. This is due to the Federal Reserve pausing rate hikes as inflation slows. Dietz also notes that a new analysis using personal-income-per-capita estimates from the Bureau of Economic Analysis aligns with the geographic HBGI data, showing single-family and multifamily home construction becoming more concentrated in outlying areas instead of urban centers.
Shifting Market Share
As urban counties with higher incomes lose market share in both single-family and multifamily sectors, large metro outlying counties posted the largest increase in single-family market share between the second and third quarter of 2023, rising from 9.5% to 9.7%. The HBGI is a quarterly measurement of building conditions across the country, using county-level information about single-family and multifamily permits to gauge housing construction growth in various urban and rural geographies.
Building by Area Type in Q3 2023
- 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 conclusion, while the housing market continues to face challenges such as rising mortgage rates, increased construction costs, and labor shortages, there are signs of a potential turnaround in the near future. The shift towards exurban areas for home construction could provide new opportunities for both homebuyers and investors. To stay informed about the latest market trends and make the best decisions for your real estate investments, consider working with an experienced REALTOR®.
Orginal article: Link To Article – provided by Kansas City Realtors
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