Research Shows Smaller Housing Markets Could Be KeyJune 23rd, 2020 by Emmariah Holcomb
COVID-19 has changed the way many door and window companies operate, leaving some to follow housing trends associated with the pandemic. Meanwhile, research indicates that COVID-19 is likely to hasten housing trends already underway in residential construction—including a rapid expansion of low-density markets, such as smaller cities and rural areas, making them key areas for companies selling to builders and developers. 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 chairperson.
According to NAHB’s research, metropolitan areas are faced with greater challenges associated with COVID-19. High-density lifestyles, championed by some urban planners over the last decade as rivals to suburban living prove to be vulnerable due to crowded living conditions, dependency on mass transit, and insufficient health and public sector infrastructure, the association suggests. The HBGI found home construction activity was increasing at a higher rate in inner and outer suburbs than in high-density markets before the pandemic hit.
“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,” said Robert Dietz, NAHB chief economist. “This trend will continue as households seek out single-family homes further from urban cores, particularly as telecommuting continues in greater numbers.”
According to first-quarter HBGI measurements:
- Single-family construction expanded across all seven economic geographies, posting the strongest growth of 9.1% in outlying suburbs 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; and
- All economic geographies reported net growth over the past year for single-family and multifamily construction.
The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multi-family permits to gauge housing construction growth in various urban and rural regions. The first quarter HBGI also highlighted a new economic geography class based on local employment in the education and health services sector (EHS). The HBGI designates EHS-focused regional markets as the top quartile of counties based on this employment share. These counties also make up 23.2% of the U.S. population. Analysis finds:
- 4% of single-family construction occurs in EHS markets;
- 4% of multifamily construction occurs in these markets;
- Multifamily construction has outpaced single-family construction in these markets over the past year;
- Multifamily construction has expanded at nearly twice the growth rate of the rest of the construction in EHS markets over the past year; and
- Single-family construction was growing in EHS markets, but the rate was slower than the rest of the nation.
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