The first quarter 2021 Home Building Geography Index (HBGI) showed that single-family home building continued to shift to low-density and low-cost markets, a trend stemming largely from the COVID-19 pandemic and first reported in the second quarter of 2020.
However, this suburban shift has been even more pronounced in the multifamily sector, which is experiencing growth in 2021 after a slight decline in 2020. The combined apartment market share for large core and suburban counties declined from 67 percent to 63.4 percent between the first quarter of 2020 and the first quarter of 2021. Suburban counties of large metro areas lost market share by a striking 1.1 percentage points in the first quarter alone, exemplifying the pandemic’s “great disruption” and its impact on housing preferences.
As noted in prior analyses, market shares, as when measured on a four-quarter moving average basis, have historically been slow to change composition over time in normal economic circumstances. Hence, a quarterly regional market share change of one-percentage point or more is significant and noteworthy.
As can be seen above, small metro (core and suburbs) saw gains for apartment construction from 24.7 percent to 27.1 percent as multifamily development moved to lower density areas. This gain came at the expense of large metro core and suburban counties.
For single-family home building, the suburban shift was less amplified but evident nonetheless: the market share for large metro core counties declined from 18 percent in the first quarter of 2020 to 16.9 percent in the first quarter of 2021. Outlying counties (outer suburbs) of large and small metros expanded from 17.2 percent to 17.9 percent. The strongest quarterly gains were experienced in outlying counties of large and small metro areas, by 20.3 percent and 21.7 percent, respectively, and in rural counties by 20.3 percent. These three regional classes constitute 22 percent of single-family residential construction’s market share. Large metro core areas showed the slowest growth rate at 9.7 percent, a positive rate but a relative laggard.
The NAHB forecast assumes some rollback of housing demand to medium density markets, particularly during the second half of 2021. This rollback can be seen in recent strength for townhouse construction.