The third cut of NAHB’s Home Building Geography Index (HBGI) defines “Millennial counties” as those having at least a 26% share of total population belonging to the Millennial generation (born between 1981-1997). The top 25% of counties with a high millennial concentration represent 62% of the U.S. population. These counties also constitute 59% and 80% of single-family and multifamily construction, respectively. These shares are according to the third quarter NAHB Home Building Geography Index (HBGI).
Yet, construction growth rates for single-family and multifamily home building in these regions, “Millennial areas,” are generally lower than the remaining 75% of counties. These statistics point to a growing geographic mismatch between younger households with expanding housing demand and where construction is expanding.
The third quarter 2019 Millennial-focused analysis of the HBGI reveals 59.9 million millennials live in counties that represent the top quartile of millennial-concentrated areas. These counties possess approximately 67% of the total number of all Millennials, per Census Bureau population data.
Yet despite the fact that Millennials represent a critical source of emerging housing demand over the next decade, home building growth has lagged in these counties. While 2016 saw brief double-digit, year-over-year growth rates for single- and multifamily permits, these rates have slowed in recent quarters.
As seen in the figure above, the four-quarter moving average of year-over-year single-family construction growth rates was negative for Millennial areas in the third quarter (-2.4%). This was similar to the negative trend in apartment construction that was observed in large metro core counties, where many young urban professionals reside.
As can be seen from the figure above, single-family home construction growth has been generally lower in Millennial-intensive counties compared to the rest of the nation – the opposite of what future housing demand requires.
With respect to multifamily development in Millennial-intensive counties, apartment construction has been relatively flat since 2017, while only picking up in the most recent quarter.
Overall, the new HBGI data indicate that new home construction is concentrated in the top counties for Millennial population, representing 59% of single-family and 80% of multifamily development. But the growth rates for these areas have been lagging the rest of the nation in recent quarters, suggesting a possible spatial mismatch between housing demand and housing supply, which further exacerbates the ongoing housing affordability crisis particularly for younger households.
In forthcoming analyses, we will further examine other findings of the 3rd quarter HBGI data, including analyses on land affordability from the Regional cut and on earlier millennial market shares.