Single-Family Construction Ends Year with Growth; Greater Uncertainty for 2025
A lack of existing home inventory helped propel single-family construction growth in all geographic regions to end 2024, according to the latest National Association of Home Builders (NAHB) Home Building Geography Index (HGBI) for the fourth quarter of 2024 released today.
“Single-family housing construction ended the year with growth as a shortage of existing homes for sale continues to increase demand for newly built homes,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “Multifamily construction was lackluster in high-density areas, while construction in smaller counties continued to grow and gain market share”
“Single-family construction has been holding remarkably steady, despite elevated mortgage rates and tight lending standards for construction and development loans,” said NAHB Chief Economist Robert Dietz. “Upside and downside risks will become clearer as the new year progresses. An easing regulatory environment and tax cuts could act as tailwinds but tariffs and potentially higher deficits could dampen market momentum. Additionally, A growing trend away from work-from-home could increase building activity in inner suburbs in the quarters ahead.”
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 index has registered four consecutive quarters of single-family growth across the seven key geographic and high- and low-density areas. If construction growth remains steadily positive through the start of 2025, anticipated Federal Reserve rate cuts later this year could help spur new construction and keep single-family home building at a more normalized pace.
The fourth quarter HBGI shows the following market shares in single-family home building:
- 16.1% in large metro core counties
- 24.7% in large metro suburban counties
- 9.4% in large metro outlying counties
- 29.1% in small metro core counties
- 10.0% in small metro outlying areas
- 6.3% in micro counties
- 4.2% in non-metro/micro counties
Multifamily construction was mostly negative across high-density areas, which represent the largest segments of the market. These high-density areas have seen seven consecutive quarters of contraction after expanding to record highs in 2022. Many of the multifamily units that were started during the record highs in 2022 are starting to reach completion.
The vast number of units that have been under construction over the past year should help to alleviate some shelter inflation, which remains sticky and higher than other components of inflation. As inflation slows, lending conditions will improve, which would help the multifamily market climb back to healthy conditions.
The fourth quarter HBGI shows the following market shares in multifamily home building:
- 38.5% in large metro core counties
- 24.9% in large metro suburban counties
- 4.0% in large metro outlying counties
- 23.3% in small metro core counties
- 4.9% in small metro outlying areas
- 3.3% in micro counties
- 1.1% in non-metro/micro counties
The full HBGI data with geographic market shares and growth rates can be found here.