The fourth quarter NAHB Home Building Geography Index (HBGI) highlight recent performance of single-family and multifamily construction markets across the seven population density-based regional geographies of the index.
Over the course of 2019, exurbs outside medium-sized cities, i.e., outlying counties of small metro areas, performed best at 2.9% growth rate. Small towns (micro counties) performed next best at 2.8%, although this region represents only 6% of single-family starts. The gains in these regions owe to cheaper land and lower regulations, thus making development easier.
In contrast, large metro area performances faltered in 2019. Large metro suburbs were down 1.4% over the year and their core counties made only a small recovery from the negative performance in the previous quarter. These higher cost markets suffered due to higher mortgage interest rates at the start of 2019. Together, large metro areas make up about 45% of the market share for single-family homebuilding, with exurbs adding another 9%. The exurbs were the best performing regions in the large metro regions in 2019.
In the multifamily sector, there was solid growth among all regions. Among the major hubs for apartment construction, small metro area core counties recorded the best performance in 2019 at 22.1% growth, with large metro core and large metro suburbs growing by 7.3% and 3.5%, respectively. However, other regions, those with lower market shares, also posted gains for the year. Multifamily construction was supported by growth in demand for rental housing, particularly during the first half of the year when the homeownership rate declined.