COVID-19 to hasten housing activity in smaller markets

Home COVID-19 COVID-19 to hasten housing activity in smaller markets

The COVID-19 pandemic is likely to hasten a housing trend already taking place across the nation—residential construction activity that is expanding at a more rapid rate in lower density markets such as smaller cities and rural areas. Multi-family development is also proceeding at a brisk pace in areas where education and health services dominate. These are among the findings of the latest quarterly National Association of Home Builders (NAHB) Home Building Geography Index (HBGI).

“We expect the virus could affect future housing preferences for those currently living in the hardest-hit, high-density environments like central cities and that housing demand will continue to increase in medium- and low-density communities,” said Dean Mon, NAHB chairman.

Robert Dietz, NAHB chief economist, added, “The first quarter HBGI data reveals that construction growth expanded over the last year more quickly in low population density areas than high density regions. This trend will continue as households seek out single-family homes further from urban cores, particularly as telecommuting continues in greater numbers.”

An unavoidable lesson of the public health crisis associated with COVID-19 is that major metropolitan areas faced greater challenges. High density lifestyles, championed by some urban planners over the last decade as a rival to suburban living, proved to be vulnerable to a virus due to crowded living conditions, dependency on mass transit and insufficient health and public sector infrastructure, according to the NAHB.

The HBGI found that even before the pandemic hit, home construction activity was increasing at a higher rate in inner and outer suburbs than in high-density markets.

First quarter HBGI findings show:

  • Single-family construction expanded across all seven economic geographies, posting the strongest growth (9.1%) in outlying suburbs (exurbs) of small metro areas, as measured on a one-year moving average.
  • Over the past year, apartment construction growth in less dense markets has outpaced expansion in larger metropolitan areas.
  • All economic geographies reported net growth over the past year for single-family and multi-family construction, a reminder of the momentum home building possessed before the current recession.

The first quarter HBGI also features a new economic geography class based on local employment in the education and health services sector (EHS). Given the public health crisis associated with COVID-19, this sector is of critical importance, according to the NAHB. The HBGI designates EHS-focused regional markets as the top quartile of counties based on this employment share (25.7% or above of total employment). These counties also make up 23.2% of the U.S. population. This analysis found:

  • 4% of single-family construction occurs in EHS markets
  • 4% of multi-family construction occurs in these markets
  • Multi-family construction has outpaced single-family construction in these markets over the past year
  • Multi-family construction has expanded at nearly twice the growth rate of the rest of the construction in EHS markets over the past year
  • Single-family construction was growing in EHS markets, but the rate was slower than the rest of the nation

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