Housing MarketReal Estate

Suburbs see greatest gain in single-family construction in Q3

Second-home markets are also seeing growth during the pandemic

The National Association of Home BuildersHome Building Geography Index found that during the third quarter, the exodus from big cities to the suburbs and less expensive areas increased as people continue to work remotely.

According to the HBGI, suburbs of medium-sized cities posted the greatest single-family gains in Q3, as there was a 15% growth rate over the last four quarters. The worst-performing regions were large metro urban cores, with a 5.7% gain.

Since Q1, the market share for single-family construction in urban core areas fell from 18% to 17.2%, the report said. However, small metro core and suburban single-family market share increased from 37.7% to 38.2%.

The report showed that single-family construction in second-home markets expanded at a 13.6% average rate over the last four quarters compared to a 10.5% pace for other counties. Apartment construction increased in second-home markets by 11.1%.

“The HBGI clearly shows that the geographic changes noted in the second quarter data continued into the fall, providing a boost to building in more affordable markets,” said NAHB Chief Economist Robert Dietz. “The ability of individuals and families to live further from urban cores is empowering consumers to acquire housing with more space at a lower cost. A key question is how long this effect will last. Our forecast assumes at least a persistent, partial effect beyond the deployment of a vaccine.”

According to the report, apartment construction in large metro core and suburbs fell from 67.1% to 65.2% during Q3, while apartment construction in small metro core areas increased from 21% in Q1 to 22.4% in Q3.

“The growing demand in lower density markets stems from the fact that housing is less expensive compared to urban areas and buyers can afford larger homes to accommodate home offices, exercise rooms and other specialty rooms which are in higher demand since the pandemic,” said NAHB Chairman Chuck Fowke. “However, builders continue to deal with affordability headwinds on the supply-side front, including the cost and availability of building materials.”

On Tuesday, Fowke commented on recent actions by the Commerce Department reducing duties on softwood lumber shipments from Canada to the U.S. from more than 20% to 9%, saying it’s a “positive development, but more work needs to be done.”

“Tariffs have contributed to unprecedented price volatility in the lumber market in 2020, leading to upward pressure on prices and harming housing affordability for American consumers,” Fowke said. “The U.S. needs to work with Canada to end the tariffs and achieve a long-term, stable solution in lumber trade that provides for a consistent and fairly priced supply of lumber.”

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