Apartment Construction Increasing in Smaller Metros

(Illustration courtesy of NAHB)

Apartment construction is shifting to counties with lower population densities, the National Association of Home Builders’ Home Building Geography Index reported.

“Elevated interest rates, tight lending standards and economic uncertainty remain persistent factors limiting construction growth,” NAHB Chief Economist Robert Dietz added. “And despite overall market declines for the multifamily sector, as demand for affordable, attainable housing continues to be strong, the multifamily market is exhibiting strength in lower cost areas where housing supply can more readily expand.”

The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single-family and multifamily permits to gauge housing construction growth in various urban and rural geographies.

Multifamily construction exhibited a trend of solid growth in counties with lower population densities during the first quarter while the market share in large metro core counties continued a long-term downward trend. It was 45.1% in 2016 and in less than 10 years has fallen 9.4 percentage points to a 35.5% share, the lowest level since the HBGI inception.

The market share for core counties of large metro areas fell three percentage points in the last quarter, NAHB reported. This quarterly decline led to a rise for all other urban and rural geographic areas in the opening quarter of this year.

The first-quarter HBGI showed the following market shares in multifamily home building:

35.5% in large metro core counties

25.7% in large metro suburban counties

4.7% in large metro outlying counties

24.1% in small metro core counties

5.1% in small metro outlying areas

3.7% in micro counties

1.2% in non-metro/micro counties