Labor and supply shortages as well as higher mortgage rates continue to hamper the housing industry, according to the NAHB Home Building Geography Index (HBGI) for the first quarter of the year.
The report indicates single-family home building experienced negative growth rates in all submarkets on a national basis, while growth rates for the multifamily sector increased in large metro core counties (+3.2%) and large metro outlying counties (24.5%).
“This latest data indicates that the pace of single-family construction in the first quarter of 2023 has slowed from pandemic-induced highs, but a turning point is coming into view with a rebound led particularly in more affordable, lower-density areas,” says NAHB chairman Alicia Huey. “And while many builders are having difficulties with labor shortages and tighter finance conditions, the multifamily building market remains strong with risks of slowing later this year.”
The lowest single-family year-over-year growth rates in the first quarter occurred in large metro core counties, which posted a 25.6% decline. Large and small metro areas also recorded double-digit negative growth rates, while rural markets recorded negative growth rates in the single digits. Over the past four years, the NAHB says rural markets have exhibited strength relative to other geographic areas and has increased its single-family building market share to 12% in the first quarter of this year from 9.4% at the end of 2019.
“Higher interest rates and construction costs, along with shortages of key materials such as transformers and concrete, have contributed to all single-family markets posting a negative year-over-year building growth rate, but this is particularly true for the largest, densest metro areas,” NAHB chief economist Rob Dietz says.
The first quarter HBGI indicates large metro suburban counties and small metro core counties account for over half of the single-family home building market share. Large metro core counties account for 15.7% of the total market, according to the NAHB.
In the multifamily sector, building activity is shifting back toward densely populated areas, with market share for the segment increasing 0.8% sequentially to 37% in the first quarter.
The HBGI is a quarterly measurement of building conditions across the country. The index uses county-level information about single-family and multifamily permits to gauge housing construction growth in various submarkets.