Led by larger urban metro markets, single-family growth rates are showing signs of a turnaround as moderating mortgage rates and a lack of existing inventory are contributing to a gradual upward trend, according to the latest findings from the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for the fourth quarter of 2023. Meanwhile, new data on overall production in coastal areas shows that single-family home building is holding steady while multifamily is falling.

“While all urban, rural, metro and county area single-family markets experienced double-digit production declines in the third quarter, construction began to turn the corner in the final quarter of the year,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Four out of the seven markets had declines of less than 5% while one market—small, metro outlying counties—grew at a modest 0.4% rate. This positive trend is due in large part to moderating interest rates and the mortgage ‘lock-in’ effect that is dissuading many home owners with low mortgage rates from listing their homes.”

“Single-family construction showed gradual growth across much of the nation in the fourth quarter compared to the previous quarter, and this positive movement corresponds with our latest builder surveys,” said NAHB Chief Economist Robert Dietz. “Meanwhile, new multifamily building in large, metro suburban counties posted a negative growth rate of 20% in the fourth quarter, reflecting the tail end of an apartment building boom that reached its highest level in more than 50 years.”

The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural geographies.

The year-over-year growth rates for many single-family markets have increased from the first quarter of 2023 through the last three months of the year, with only micro counties having a lower growth rate in the fourth quarter among all markets compared to the first quarter.

Breaking down the nation’s seven metro and county areas, the fourth quarter HBGI shows the following market shares in single-family home building:

• 16.0% in large metro core counties
• 25.0% in large metro suburban counties
• 9.6% in large metro outlying counties
• 28.7% in small metro core counties
• 10.0% in small metro outlying areas
• 6.5% in micro counties
• 4.2% in non-metro/micro counties

In the multifamily sector, growth rates were negative or holding steady in the nation’s largest metro and suburban counties, while growth rates exhibited the strongest readings in lower density areas.

Coastal Areas vs Non-Coastal

New analysis of U.S. coastal counties in this HBGI report reveals around 25% of single-family construction consistently takes place in coastal counties, with multifamily production accounting for about one-third of new building in coastal areas.

For the single-family market, the market share for coastal counties and non-coastal counties has held remarkably steady since 2014, with coastal counties in the fourth quarter of 2023 making up 24.7% of new home building while non-coastal counties have a market share of 75.3%. These shares are strikingly similar to the fourth quarter of 2014, when coastal counties had a market share of 24.6% and non-coastal registered a 75.4% rate.

The market shares for multifamily tell a different story. New multifamily construction in coastal counties has fallen from the fourth quarter of 2014, when the market share was 36.6%, and now stands at 30.3%.

This shift in multifamily building that has led to a higher market share for non-coastal areas was seemingly sparked by the Covid pandemic. The market share for non-coastal counties was at 63.3% in the fourth quarter of 2019. Once the pandemic hit, this share jumped 5.13 percentage points over the next two years and has consistently increased since then.

Another factor driving this multifamily building shift is the fact that many coastal counties lie in or near large population centers on both coasts, and this decline is consistent with the broader picture of multifamily growth rates falling in larger markets and increasing in more rural, outlying areas.