Single, Multifamily Growth Trended Opposite Directions In Last Half Of 2021

Single-family growth cooled in Q4 2021 while multifamily growth in high-density areas surged, according to the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI).

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.

“Multifamily production posted strong gains in all regional markets as the demand for apartments increased,” said NAHB Chief Economist Robert Dietz.

“Meanwhile, supply-side constraints that include ongoing labor shortages and a lack of key housing products that include garage doors, appliances and windows has delayed single-family construction times across the nation and put upward pressure on home prices.”

The price of construction materials jumped 17.5% from 2020 to 2021, the biggest year-over-year increase since 1970. That, paired with stock shortages and rising mortgage rates, pushed home prices up 19.1% annually in January.

“Builders are entering 2022 with backlogs that they are having a hard time completing due to material and labor shortages,” First American Deputy Chief Economist Odeta Kushi recently said.

“And new-home prices are sitting near a historic high. Demand for new homes remains strong, as there is a lack of existing-home inventory, but rising new-home prices may be pricing out some buyers.” 

Single-family growth in all markets cooled after peaking in Q2 2021 but remained in the double-digits at year’s end. Large metro core counties saw four-quarter moving average single-family growth rates drop from 26.3% in Q2 to 13% in Q4, while suburban counties fell from 31.6% in Q2 to 13.2% in Q4.

High-density markets saw a surge as concerns over Covid-19 subside. Most single-family homebuilding (51.1%) took place in large metropolitan statistical areas (MSAs), 38.4% in small MSAs, and 10.5% in rural markets and small towns.

Multifamily production remains high in large metros, accounting for 66.5% of construction, followed by small MSAs at 27.4%, and rural and small-town markets at 6.1%.

“Single-family home building activity surged in the wake of the Covid crisis, as interest rates fell and prospective home buyers sought more space,” said Dietz.

“The rebound for multifamily construction lagged somewhat as housing demand had shifted to lower density markets. As some of that demand returns, a rebound for apartment building has occurred.”