Similar to the evolving geography for single-family home building, multifamily construction has shifted into less dense markets during the third quarter of 2020, according to the latest NAHB Home Building Geography Index.
Previously, multifamily building market shares have been the highest for large metro areas (40%), suburban counties (26%), and small metro areas (22%). As of Q3 2020, core counties of large metro areas posted a multifamily residential construction decline of 4.2% (on a moving, four-quarter average basis), while suburbs of large metro areas experienced a greater decline of 4.9%.
In contrast, during the third quarter multifamily construction expanded in more affordable markets, continuing a trend that started in the second quarter. The market share for apartment construction in small metro core areas increased from 21.4% in the second quarter to 22.4% in the third quarter, a significant gain considering how slowly regional submarkets’ compositions change. In fact, the largest gains in multifamily development during the third quarter were experienced in small towns (“micro counties”) and rural areas (“non metro micro counties”) at 19% and 23%, respectively.
NAHB’s forecast is for multifamily construction to decline in 2021 as weakness continues in the most dense market areas. However, there will be localized gains in areas of lower density and lower construction cost before the market stabilizes in 2022.
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