Geography of Homeownership and Home Building

A majority of single-family home building occurs in counties that are in the lowest quintile of homeownership rates, according to NAHB analysis of 2021 5-year American Community Survey (ACS) county-level data and single-family permit numbers. This somewhat counterintuitive result is actually a reflection of the concentration of households in a small number of counties.

For this analysis, counties were grouped into quintiles by homeownership rate. The lowest group, the 20th percentile, had homeownership rates less than or equal to 66.53%. The next or fourth quintile was grouped as having a homeownership rate greater than 66.53% but less than or equal to the 40th percentile of 71.79%. The third quintile ranged from a rate greater than 71.79% to less than or equal to 75.56% while the second quintile was greater than 75.56% but less than or equal to 79.22%. The first quintile was any county with a homeownership rate greater than 79.22%.
Before looking at permit data based on these quintiles, it should be noted that approximately 177 million people live in counties in the lowest quintile. As previous NAHB analysis has shown, population density helps to explain a substantial amount of the variation in homeownership rates across counties in the U.S. The 100 smallest counties by population have an average homeownership rate of 72.72%, while the 100 largest counties by population have an average homeownership rate of 59.96%.

NAHBs quarterly Home Building Geography Index (HBGI) data shows that on average 53% of all single-family building occurs in large metro areas, where homeownership rates are typically lower. Rural areas in the HBGI, where homeownership rates tend to be higher, make up a much smaller portion of home building.

Aggregating each county’s single-family permits into these quintiles, the data shows that the four-quarter moving average market share for the lowest quintile had a market share of 39.62% in the second quarter of 2023, the lowest market share dating back to the fourth quarter of 2017 when it was 44.38%. The lowest quintile market share has averaged 42.47% over the almost six-year period and has consistently made up the bulk of single-family building.

The fifth quintile’s loss in single-family building market share started with the onset of the pandemic. The average market share prior to, and including the first quarter of 2020, was 44.19%. This average fell to 41.51% over several quarters following the first quarter of 2020.

Over the same period, the largest growth in market share was for the third quintile, which saw its market share grow from 14.13% to 16.65%, a 2.52 percentage point increase. The second quintile gained the second most market share between the end of 2017 and today, gaining 1.52 percentage points, as it rose from 13.10% to 14.62%. The first quintile had the third largest growth in market share, rising 1.16 percentage points from 9.87% to 11.02%. The fourth quintile fell 0.43 percentage points from 18.52% to 18.08%, the only other quintile to lose market share over this period.

With over half of the population living in relatively lower homeownership areas, single-family home building is correspondingly concentrated in places with a larger number of households. Counties with the highest homeownership rates make up the smallest share of single-family construction.

An additional finding of the analysis involves the impact the pandemic had on the geography of housing: namely the changes in the market share of home building relative to homeownership. While home preferences are constantly changing, it is evident that the pandemic shifted the single-family market somewhat away from high density areas as individuals moved further away from urban cores into the suburbs where homeownership rates are higher. Single-family building followed these movements as the market share for the lowest homeownership counties fell below 40% in the second quarter of 2023.


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One thought on “Geography of Homeownership and Home Building

  1. Clients should consider regional trends and market conditions when applying for construction loans, ensuring they align financing terms with the specific dynamics of the chosen geographic area to maximize project success. That is why it’s important to have the right financial partner by your side that can make all the difference. Us at builderloans.net can help you in achieving this.

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