Suburban, Exurban Communities Post High Multifamily Gains

Lower cost, lower density metros have been the biggest draw during the pandemic housing market for buyers. Lower land and labor costs, along with more relaxed regulations, also have attracted more builders to construct homes in suburban markets, says the National Association of Home Builders. During the second quarter of 2021, multifamily construction benefited most from the suburbs. Small metro core and suburban areas posted double-digit growth for multifamily construction while large metro areas saw a decrease. It’s also a result of telecommuting freedoms, notes NAHB, as more workers are not tethered to a physical office.

There was a marked increase in new apartment construction outside large metro areas as people have greater flexibility to live and work in more affordable markets,” said NAHB Chief Economist Robert Dietz. “Similarly for the single-family sector, the HBGI data revealed that construction growth occurred more proportionally in these more affordable areas as well, while declining in terms of market share in the most expensive counties. However, overall single-family starts have slowed in recent months largely because of rising prices and limited availability of a broad range of key building materials.”

The second quarter HBGI also examined the correlation between construction activity and housing affordability. Findings show that since the beginning of the pandemic, growth rates in multifamily construction have been flat in the most expensive housing markets and stronger in more affordable areas. In the segment defined as the “most affordable” regions of the country, multifamily construction posted a 48.3% gain since the second quarter of 2020.

Single-family home building has also experienced a shift toward more affordable markets, though not as pronounced as multifamily. Exurbs and outer suburbs of medium-sized cities accounted for 18.1% of single-family construction in the second quarter – a market share gain of 0.8 percentage points since the fourth quarter of 2019. And while the bulk (45.8%) of single-family construction occurred in core areas of large and medium-sized metros, that share has declined 1.2 percentage points for that period.

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