The pace of single-family home building slowed in exurban areas, which experienced strong growth in the pace of building since the pandemic, according to the NAHB’s most recent Home Building Geography Index (HBGI). Both supply chain disruptions and high mortgage rates have impacted the housing market and the pace of building.
The growth rate of single-family construction in large metro outlying counties went down to negative 4.4% in the third quarter of 2022 from 31.9% in the third quarter of 2021. Meanwhile the growth rate in smaller metro outlying counties fell 30.6 percentage points, from 26.5% to negative 4.1%.
NAHB’s HBGI shows that single-family home building in urban core areas in both large and small metro areas saw negative growth rates in the third quarter of 2022, while rural counties, including both micro counties and non-metro/micro counties, had positive year-over-year growth rate. Higher housing prices in urban core areas make it more sensitive to hikes of interest rates, compared to those outside the urban cores.
Housing demand continued shifting from these higher density core areas to low density markets, where homes are larger and more affordable in the third quarter of 2022. At the beginning of the pandemic, home buyers desired more personal space for the work-from-home and remote learning models. Declines in housing affordability in high cost and highly regulated markets also drove home buyers to low-density outer markets, which have a larger share of affordable homes.
