Major manufacturing areas saw a drop in home construction in the second quarter of 2019 the latest Home Building Geography Index (HBGI) reports. The National Association of Home Builders (NAHB) annual report heralds an economic softening in the manufacturing sector contrasting 2017 growth rates of home construction where counties with relatively high shares of local manufacturing employment outpaced the rest of the nation.

“The HBGI data show that the manufacturing sector of the economy has been gradually losing steam since 2017 and there has been a corresponding drop in new home construction in counties where manufacturing employment is most concentrated,” said NAHB chief economist Robert Dietz. “This correlation indicates that as housing goes, so goes the economy.”

The housing markets in the top manufacturing counties, what the HBGI second quarter observes, represents 10% of the nation’s single-family production output and 6-7% of multifamily construction. On a year-over-year basis, the second quarter data revealed a decrease in single (3.8%) – and multifamily (4.1%) home building in these areas continuing the dip from the first half of 2019.

“The analysis of the NAHB geographic tracking of home construction trends is a reminder of the challenges that the housing affordability crisis presents for larger markets, where a dearth of buildable lots and stricter zoning regulations are putting upward pressure on home prices,” said NAHB chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

The HBGI uses county-level information about single- and multifamily permits to quarterly gauge housing construction growth in various urban and rural regions across the country.

Single-family construction in rural areas and exurbs is flat, while there are noticeable declines in other regions, particularly large metro suburbs. Apartment construction continues to decline in large-metro-core and -suburban areas but growth is present in exurban, small metro and more rural areas.