A shift favoring the outer suburbs among prospective home-buyers, precipitated in large part by the onset of the pandemic last year, continues, but new data reveal that higher density markets are making a comeback.
“As more workers transitioned back to the workplace, there was a rebound for housing production in urban core markets as well as ongoing growth in exurban areas,” said National Association of Home Builders chairman Chuck Fowke, a custom builder from Tampa, reacting to the organization’s quarterly Home Building Geography Index (HBGI), released Dec. 7.
The four-quarter moving average for large metro core area single-family permit growth between the third quarter of 2019 and 2020 was 5.6 percent, while exurbs grew at a rate of 12.3 percent. Jumping ahead a year, the new permit rate of growth in the same four-quarter period between 2020 and 2021 increased to 21.1 percent for large metro core markets and 30.8 percent for the exurbs.
“Although all geographies are showing construction growth, the suburban shift is less pronounced than we’ve seen in prior quarters, as some higher density markets see a rebound even as exurbs continue to expand,” said NAHB chief economist Robert Dietz.
The growth juggernaut moves forward even though “builders are still grappling with affordability headwinds in both small and large markets,” Dietz said.
Meanwhile, markets in which second homes predominate are seeing solid growth, as the permit growth rate was higher in traditional second-home markets (counties with a large share of existing second homes).
Between the third quarter of 2020 and 2021, the growth rate for single-family home building in these second-home markets was 36.1 percent, compared to an average of 23.2 percent for non-second-home markets.
“Over the last year, second home markets have increased their market shares, due to increases in hybrid work arrangements, early retirements and wealth gains in housing and stocks,” said Dietz.