In a sign that housing affordability is a growing issue nationwide, the exurbs – areas just outside suburbs – were the only region that registered single-family permit growth on a year-over-year basis in the first quarter of 2019, according to a new National Association of Home Builders (NAHB) Home Building Geography Index (HBGI).
The HBGI is a quarterly measurement of building conditions across the country. It uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural regions.
“The HBGI is another indicator finding that housing affordability is a root cause of soft single-family permit issuance nationwide,” says NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “A shortage of buildable and affordable lots is forcing builders to increasingly look further outside of suburban and metropolitan areas to find cheaper land that provides more building opportunities.”
Exurbs, which the HBGI defines as outlying counties of large metro areas with at least 1 million residents, were the only region to show net single-family permit growth when comparing the first quarter of 2019 data relative to the starting quarter of 2018, which saw a 1.6% gain. But exurbs only consist of 9% of single-family construction nationally.
Relatively sparsely populated areas that include exurbs, small towns, rural communities and outer suburbs of small metropolitan markets have shown the largest annual single-family growth over the past four quarters while other areas have shown either no change or declines.
“The HBGI data is consistent with the fact that housing costs are increasing fastest in large metro suburban counties and smaller metro areas with populations under 1 million where demand for housing is high but supply constraints are tight,” says NAHB Chief Economist Robert Dietz. “Supply-side issues that are hurting affordability and raising costs for builders include excessive regulations, labor shortages, rising material costs and a dearth of buildable lots in mid- to high population centers.”
The market share of apartment construction mirrored the single-family sector. Over the last year, multifamily permits declined in the areas where apartment construction is most concentrated – small and large metropolitan areas. At the same time, multifamily growth occurred in exurbs and other outlying areas. However, these markets represent just more than 10% of multifamily permit issuance.
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