Single-Family Gains Limited to Rural Areas and Exurbs: 2Q19 HBGI

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When NAHB’s Home Building Geography Index (HBGI) was unveiled, it examined construction along a population density-based delineation of U.S. counties into such geographies as suburbs, exurbs, rural areas, etc. The second quarter release introduces a new geography, manufacturing areas, while updating the first regional tracking, as described here.

Of the seven “regions” of the HBGI, only exurbs and rural areas showed growth in single-family home building for the second quarter, though that expansion was slight. Exurbs are the outlying counties of large metro areas and rural areas are non-metro/micro counties. The exurbs’ share of single-family home building increased from 6% in the period right after the Great Recession to 9% as of the second quarter of 2019.

While exurbs posted a year-over-year single-family construction gain for the first quarter of 2019 (due to relatively housing affordability compared to other more costly geographies), the four-quarter average growth rate slowed to 0.3% in the second quarter as broader home building slowness expanded to these outer areas. The map below shows the counties identified as exurbs.

 

In contrast, rural areas’ share of single-family home building decreased from 4% at the end of the Great Recession to 3% as of the end of the second quarter of 2019, as concerns about housing supply in rural areas were voiced. Despite these long-term concerning trends, the second quarter data were positive. Rural areas experienced a 3.7% year-over-year gain, with the four-quarter moving average posting a slight increase for the past year (0.4%). The map below shows all the U.S. counties identified as rural areas.

 

The most recent data of Starts and Completions by Purpose and Design also attest to the softening of single-family construction, specifically townhouses, many of which are built in large metro suburban markets. Large metro suburban markets showed a decline of 3.4% on a four-quarter moving average basis as of the second quarter of 2019 as housing affordability headwinds concerning pricing continued, despite recent declines in mortgage interest rates.

While most HBGI regions showed declines for single-family construction activity for the first half of 2019, recent construction and sales data indicate that housing may have turned a corner in the late spring. The third quarter data of the HBGI will track which regions fared better during this turn.



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