After the onset of the COVID-19 pandemic, the annual growth rate in most counties for single-family building jumped from mid-single digit annual growth rates to yearly growth rates in the teens to even high-30% range. However, that has changed in recent months. Single-family building in large metro outlying counties and exurban areas has waned in the last 12 months, according to the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for the third quarter of 2022. 

Exurban areas (large metro outlying counties) recorded the largest 12-month decline in single-family construction, dropping from an annual growth rate of 31.9% in Q3 2021 to a rate of -4.4% in Q3 2022.

Single-family production growth rate also took a substantial hit in smaller metro outlying counties, dropping 30.6 percentage points to a rate of -4.1% for the year ending on September 30, 2022.

The HBGI is a quarterly measurement of building conditions across the county. It uses county-level data for single and multi-family permits to gauge housing construction growth in both urban and rural metros.

Urban core areas in both large and small metros also posted negative growth rates during the same 12-month period, at -9.9% and -6.2% respectively, while rural counties, including micro counties (7.0%) and non-metro/micro counties (4.3%) were the only counties to post a positive year-over-year growth rate during Q3 2022.  

“The single-family construction slowdown is not just limited to regions of the country that experienced the fastest production growth over the past year,” Jerry Konter, the NAHB’s chairman, said in a statement. “Home building activity has slowed in nearly all regions and large and small metro markets as high mortgage rates, elevated inflation and stubbornly high construction costs act as a drag on consumer demand and housing affordability.” 

However, things look very different on the multifamily building front. In large metro suburban counties, multifamily construction rose from an 18% growth rate during the third quarter of 2021 to a 27.5% growth rate in the third quarter of 2022. Large metro core counties experienced a 7.1 percentage point jump during the same time frame.

But in large metro outlying counties, multifamily construction fell from a 44.1% growth rate in Q3 2021 to a 31% annual growth rate this year. In addition, high density multifamily construction in large metro core areas fell from a 41% annual growth rate of a 38.4% growth rate from the first quarter of 2020 through the third quarter of 2022.

When looking at changes in trends from single-family building to multifamily building from Q1 2020 and Q3 2022, the market share for single-family home building in large metro core and inner suburbs fell from 44% to 41.3%. In outer suburbs and exurban areas in large and medium sized metros, however, single-family building increased from 18% to 19% during the same time frame.

“While the bulk of single-family construction continues to occur in the South and lower density markets where job conditions are more favorable and housing costs are lower, the data clearly show these areas are acting as a leading indicator for the entire housing market,” Robert Dietz, the NAHB’s chief economist, said in a statement. “They are registering the largest production declines, even as other regions—including large metro core and suburban counties—are also displaying weakness as the national housing market has fallen into a recession due to rising mortgage rates and a slowing economy.”