Single-Family Constructions Down In Suburban Markets

Construction of single-family homes fell across several market types in Q1 2022, with an especially large dip in large suburban markets, according to the National Association of Home Builder’s (NAHB) Home Building Geography Index (HBGI).

Four-quarter moving average single-family growth rates in large metro suburban counties fell from 18.7% in Q1 2021 to 5.2% in Q1 2022.

At the same time, multifamily construction in large metros has jumped after falling during the pandemic. Large metro core counties recovered from a negative 3.6% growth rate to a 17.4% rate.

Multifamily construction was largely centered in large metro core areas (36.9% of development), followed by large metro suburbs (25.8%), small metro core areas (23.5%), and other submarkets (13.7%).

“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,” said NAHB Chief Economist Robert Dietz. 

“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.”

Urban areas fell out of favor during the pandemic as Americans reassessed their relationships with their homes, opting to move out of cities in search of more space and affordability.

But young people are beginning to return to the cities. Compared to 2020, there were 220,000 more Gen Zers applied for an apartment in 2021. In major urban hubs like San Diego, Los Angeles, and Philadelphia, a quarter of rental applicants are Zoomers.

Dietz said that apartment construction growth is soaring above single-family in all regions, buoyed by rising rents and low rental vacancies. 

Small metro core counties now have the highest regional market share in single-family home building at 29.2%, followed by large metro suburbs (24.8%), outlying counties of both small and large metros (18.8%), large metro core counties (16.6%), and rural areas (10.6%).