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Single-Family Growth Moving Away From Metros

The National Association of Home Builders’ (NAHB) Home Building Geography Index (HBGI) reveals [1] that exurbs and rural areas showed growth in single-family housing during Q2 2019. 

Reported growth in the HBGI for these areas was marginal, however. The exurbs’ share of single-family home building increased to 9% in Q2 2019 from 6% just after the Great Recession. Exurbs are the outlying counties of large metro areas. 

Despite the quarter-to-quarter growth so far in 2019, annual growth in single-family building in exurbs fell to 0.3%. 

Rural areas, according to the HBGI, saw single-family building fall from 4% at the end of the Great Recession to 3% at Q2 2019. 

While there are long-term “concerning trends,” the report stated, the NAHB says Q2 states were positive, overall. Rural areas posted a 3.7% year-over-year gain, with the four-quarter moving average increased slightly to 0.4%. 

The U.S. Census Bureau’s New Residential Construction Survey [2] found that while building permits grew in July by 8.4%, housing starts fell 4% in July to 1.91 million. 

Odeta Kushi, Chief Economist for First American Financial Corporation, referenced the current economic volatility, saying the inversion of the yield curve “does not mean that we’re imminently facing recession in the near future.”

“There are many factors to consider beyond the inversion of the yield curve when determining recession risk,” Kushi said. “Single-family housing starts have been a more reliable indicator, because they are a reflection of both homebuilder and consumer confidence.”

She added that homebuilders are “reluctant” to start new projects in fear the economy may fall.

Additionally, Redfin reporte that housing inventory for Q2 2019 fell 1% [3]—the largest decline in six years.

“When there’s a shift in the market, new construction is always one of the first categories to take a hit,” said San Jose, California, Redfin agent Kristen Nowack. “In the San Jose area, overall prices are falling and there are plenty of homes for sale right now, which means buyers may be less likely to pay a premium for new construction. 

“And when one builder starts dropping prices in response to the market, competitors follow suit, which could lead to overall lower prices.”