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 market share 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 the third quarter of 2023.

“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 home builder and developer from Birmingham, Ala. “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 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 lowest single-family year-over-year growth rates in the third quarter of 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 the second quarter and third quarter of 2023, rising from 9.5% to 9.7%.

Breaking down the seven metro and county areas, the third quarter HBGI shows the following market shares in single-family home building:

• 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 the third quarter, up a robust 37.9%.

On a personal income per capita analysis, the data shows that, not surprisingly, the majority of home building 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 the third quarter of 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 the third quarter of 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.

For more information on the HBGI, visit nahb.org/hbgi.