Q2 2021 HBGI: Multifamily Suburban Shift


In the second quarter of 2021, residential construction continued to shift toward the suburbs and lower-cost markets, and this trend is especially pronounced within the multifamily sector, according to the latest Home Building Geography Index (HBGI). During this period, multifamily construction posted double-digit percentage gains in small metro core and suburban areas, while large metro areas experienced a decrease for multifamily building activity.

The HBGI shows that multifamily residential construction grew by 14.3% in small metro urban cores and 25.5% in small metro suburban areas in the latest quarter. In contrast, large metro core areas recorded a 0.5% year-over-year decline, reflecting the ongoing virus crisis’s baneful effects on housing in core counties of major metropolitan areas that started over a year ago.

The top 3 regions that had the most growth, small cities’ core and outlying counties and small towns (“micro counties”), account for only 31.4% of the market share for multifamily, with 22.9% belonging to small cities’ core counties. Large metro areas’ core and suburban counties and small cities’ core counties together take 87.6% of the market share.

As shown in the above figure, unlike the varied impact of the suburban shift on multifamily residential construction in the second quarter, single-family construction posted positive, double-digit growth in all regional submarkets, with the greatest growth of 36.3% occurring in outlying counties of large metro areas. These growth rates are partly inflated due to the dip that occurred in the prior year with the onset of the COVID-19 pandemic in the United States. However, it should be noted that single-family permit issuances, when seasonally adjusted, were shown in prior analyses to have softened in the second quarter, owing to supply-side limitations.

It also bears mentioning that the HBGI data are subject to revisions. As a result of the multifamily permit revisions, the multifamily growth rates in Q1 2021 were recalculated this quarter, resulting in slightly lower estimates. Also, for single-family permit revisions, the recalculated growth rates and market shares show a more pronounced suburban shift than what was calculated in June (the “suburban shift” being the major theme of the Regional classification).

Our next HBGI analysis will focus on measures of housing affordability using price-to-income ratios. All the HBGI data can be found at http://nahb.org/hbgi.

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