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Construction Market Still Sagging, But NAHB Says Relief May be in Sight

Sept. 8, 2023

Rising mortgage rates and elevated construction costs have taken a toll on the pace of single-family construction in markets across the nation, with the slowdown most pronounced in large metro areas. Multi-family market growth also fell in most areas of the country, according to the latest findings from the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for the second quarter of 2023.

“While the pace of single-family construction posted a year-to-year decline in all the small and large geographic markets measured by the HBGI between the second quarter of 2022 and 2023, we expect these levels have bottomed out,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, AL. “Single-family production should register growth in the months ahead as the Federal Reserve nears the end of its tightening cycle and mortgage rates begin to stabilize.”

“The latest Home Building Geography Index data continue to show a changing geography for home construction,” said NAHB Chief Economist Robert Dietz. “Multi-family and single-family construction have shifted to lower-density markets, with market share gains for those types of markets. This is especially true for apartment construction, which has seen a segment share decline for large metro areas as development shifts to the suburbs and exurbs.”

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 geographies.