Regional Submarkets See Multifamily Residential Construction Decline in Q4 2020


As part of the latest iteration of NAHB’s Home Building Geography Index (HBGI), it was previously shown that single-family homebuilding in the fourth quarter of 2020 continued a trend of a suburban shift to lower density markets. However, for multifamily residential construction, what started as double-digit growth in all the HBGI’s Regional submarkets in the first quarter of 2020 devolved to lower growth and then declines for most submarkets by the end of the year.

Large metro areas’ core, suburban, and outlying counties (exurbs) registered declines of 10.6%, 13.2%, and 10.7%, respectively, in Q4 2020. Small metro areas suffered declines, as well, but to a much lesser extent: small metro core counties posted a minimal gain of 2.7% and small metro outlying counties’ multifamily grew at a 2.7% rate.

Similarly, large metro areas, particularly core and suburban counties, lost significant market share in 2020, with the former declining by 1.5 percentage points to 39.1% and the latter declining by 1.4 percentage points to 25.1%. Conversely, some lower density regional submarkets gained significant market share over 2020, such as small metro core counties increasing by a staggering 2.2 percentage points to 23.2% and micro counties (small towns) increasing by 0.6 percentage points to 3.8%. As noted in prior HBGI analyses1, regional shares of single- and multifamily home building are slow to change over time, thus making a one percentage point change in the four-quarter moving average of a market share over a single year noteworthy.

The above figure provides for an alternate understanding to the multifamily developments that took place in the regional submarkets in Q4 2020. Rather than grouping small metro areas, small towns, and rural areas into the umbrella term of lower-density regional submarkets, it views the first as its own category and second and third together as one category2. Using this classification, it is found that small towns and metro areas together performed as poorly as large metro areas by the end of the year, posting a decline of 10.7% (it was a 10.6% decline for large metro areas).

The data indicate that the relative overperformance for apartment construction in the middle of 2020, as a result of the virus crisis, waned by the end of the year, with all geographies showing multifamily construction weakness.

The Q4 2020 HBGI results are also generally consistent with those found in NAHB’s Multifamily Market Survey (MMS) for the same period. One of the two indicators of the survey, the Multifamily Production Index (which is on a scale from 0 to 100) showed all its three components below 50, indicating of multifamily residential developers’ weakness.


  1. The referenced link shows one prior HBGI-related post where the importance of the change is highlighted, but a more technical explanation is provided in this post.
  2. The underlying reason for this grouping is loosely based on similar movements in the submarkets which were consolidated into one category.

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