Suburban Shift for Home Construction Continues into Third Quarter

December 2nd, 2020 by Editor

The increased demand for housing in lower-density areas that was reported in the second quarter National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) continued into the fall, with single-family and multifamily construction in the suburbs and “exurbs” still outpacing other areas.

The third quarter HBGI shows that the suburban shift for consumer home buying preferences in the wake of the COVID-19 pandemic is accelerating as telecommuting is providing workers more flexibility to live further out away from the center of large metro areas or even to relocate to more affordable areas.

“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, a custom home builder from Tampa, Fla. “However, builders continue to deal with affordability headwinds on the supply-side front, including the cost and availability of building materials.”

Suburbs of medium-sized cities posted the greatest single-family gains in the third quarter, with a 15% growth rate over the last four quarters. The worst performing region were large metro urban cores, with a 5.75 gain. Similar results were observed in multifamily, with large metro core areas posting a 4% decline for apartment construction.

“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.”

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