Single-family construction growth has been slowing down, especially in small cities, according to the latest data from the National Association of Homebuilders (NAHB). The NAHB used small cities, which make up 37% of all single-family construction nationwide and 30% of the U.S. population as a “demographic and economic microcosm” of the United States.
According to the NAHB, small metropolitan areas, or cities with less than one million in population, despite posting the second highest year-over-year net growth rate for single family permits among all NAHB Home Building Geography Index (HBGI) areas, these small cities saw weak growth in single-family construction.
Large metro areas, with populations of more than one million, on the other hand, are posting greater rates of expansion at the start of 2019. According to the NAHB, exurbs—outlying counties of large metro areas with at least 1 million residents—were the only region that registered single-family permit growth on a year-over-year basis in Q1 2019.
Despite consisting of only 9% of single-family construction nationally, exurbs were the only region to show net single-family permit growth when comparing Q1 2019 data relative to Q1 2018, with a 1.6% gain. Other relatively sparsely populated areas, including small towns, rural communities, and outer suburbs of small metropolitan markets, have shown the largest annual single-family growth over the past four quarters, while other areas have shown either no change or declines.
A study from CoreLogic echoes the NAHB’s data, indicating that inventory growth has been hit historical lows as construction stagnates. CoreLogic states that the inventory of homes for sale in the U.S. increased in March with 4.5 months’ supply of homes, which is historically one of the lowest numbers recorded.
Although March’s figure is an increase year-over-year from March 2018’s 3.5 months of inventory, it was less than half of what it was 10 years ago—9.1 months of inventory.
“Not only is new construction and mobility--two traditional drivers of inventory--at low levels, but some potential inventory shifted to the rental market over the past ten years,” the report states.
Despite NAHB’s and CoreLogic’s predictions, RE/Max’s National Housing Report for March showed a brighter picture.
RE/MAX’s report found inventory increased month over month in March by 0.3% from February 2019 and up 5.3% from March 2018. RE/MAX estimated that, given the Rate of Sales data, the Months Supply of Inventory decreased to 2.7 from 3.7 in February 2019, and from 3.0 in March 2018.