When the end-of-the-year building permit data comes in from the U.S. Census Bureau, it’s always interesting to look at the mega-markets to see how many thousand permits they logged for the year. However, when you just look at the growth of the largest market for homebuilders, you miss out on some smaller markets growing at an impressive rate.
One way to identify the small-but-mighty markets is with the “Housing Hotness Index (HHI),” a metric that allows you to compare large and small markets on an even playing field by looking at total building permits per 1,000 residents. The HHI analyzes a market’s 2020 net migration (the difference in the number of residents moving into or out of a market area) and total building permits (both single-family and multi-family). The chart at the bottom of this post highlights the 50 metros with the highest HHI, and data for several hundred more metros is available here.
As you will see in the chart, the metros with the highest HHI aren’t necessarily the market areas with the largest population, net migration or building permits. Most of them are mid-sized markets with less than a million residents in the Sunbelt or Intermountain states. With surging population growth and white-hot housing market, it’s not surprising that Florida dominates the ranking. Seven of the 10 metropolitan statistical areas (MSAs) with the highest HHIs are in Florida: The Villages, Punta Gorda, North Port-Sarasota-Bradenton, Cape Coral-Fort Myers, Ocala, Naples-Marco Island and Lakeland-Winter Haven. Most of these MSAs are along the state’s Gulf Coast.
The three other MSAs in the Top 10 are Austin-Round Rock-Georgetown, TX; Myrtle Beach-Conway-North Myrtle Beach, SC-NC; and Provo-Orem, UT. The Intermountain MSAs with solid growth include Boise City, ID; Missoula, MT; Bend, OR; and Greeley, CO.
While perennial housings hot spots like Phoenix, Dallas, Denver and Houston made the HHI’s Top 50 metros, when you analyze their total building permits pulled per thousand residents in the HHI analysis, they didn’t measure up to many smaller markets that are attracting retirees, folks looking for vacation homes, or office workers transitioning to a work anywhere/remote office environment.