Suburban Shift for Home Construction Continues Into 3rd Quarter
A trend of higher demand for housing in lower-density areas reported in the second quarter NAHB Home Building Geography Index (HBGI) has persisted into the fall, as single-family and multifamily construction continued to overperform in lower cost markets like suburbs and exurbs.
The third quarter HBGI reveals that a suburban shift for consumer home buying preferences in the wake of the COVID-19 pandemic is accelerating as telecommuting is providing individuals more flexibility to live further out within large metros or even to relocate to more affordable, smaller metro areas.
“The growing demand in lower density markets stems from the fact that housing is less expensive compared to urban areas and buyers can afford larger homes to accommodate home offices, exercise rooms and other specialty rooms which are in higher demand since the pandemic,” said NAHB Chairman Chuck Fowke. “However, builders continue to deal with affordability headwinds on the supply-side front, including the cost and availability of building materials.”
Suburbs of medium-sized cities posted the greatest single-family gains in the third quarter, with a 15% growth rate over the last four quarters. The worst performing region were large metro urban cores, with just a 5.7% gain. Similar results were observed in multifamily, with large metro core areas posting a 4% decline for apartment construction.
“The HBGI clearly shows that the geographic changes noted in the second quarter data continued into the fall, providing a boost to building in more affordable markets,” said NAHB Chief Economist Robert Dietz. “The ability of individuals and families to live further from urban cores is empowering consumers to acquire housing with more space at a lower cost. A key question is how long this effect will last. Our forecast assumes at least a persistent, partial effect beyond the deployment of a vaccine.”
Other third quarter HBGI findings show:
- Since the first quarter, the market share for single-family construction in urban core areas fell from 18% to 17.2%. The small metro core and suburb single-family market share increased from 37.7% to 38.2%.
- The share of apartment construction in large metro core and suburbs fell from 67.1% to 65.2%. Apartment construction in small metro core areas increased in market share from 21% in the first quarter to 22.4% in the third quarter.
- These broader trends have extended to traditional vacation home markets as well. Single-family construction in second home markets expanded at a 13.6% average rate over the last four quarters compared to a 10.5% pace for other counties.
- Apartment construction in second home markets was up as well — 11.1% compared to a 0.9% decline in other counties.
For more information, visit nahb.org.
SHARE
As the home building industry celebrates New Homes Month in April, new research shows that more than half of Gen Z (53%) and millennials (52%) are progressively more open to having a smaller home with higher-quality products and amenities versus a larger home with fewer amenities. “Builders are responding to home buyer preferences and constructing homes with less square footage, which are generally more affordable and easier to maintain,” said Austin Hall. The median home size dropped from 2,200 square feet in 2023 to 2,150 square feet in 2024, the lowest in 15 years, after holding strong at 2,300 square feet from 2019-2022, according to the National Association of Home Builders. The same thing is happening to median lot sizes, which has dropped about 1,000 square feet in the last 15 years to 8,400 square feet. There are several consistently popular features among home buyers across all generations, such as a great room, laundry room and garage storage. Other top amenities and design options include drinking water filtration, special storage racks for wine/spices in the kitchen and both a shower stall and a tub in the primary bath. “New home buyers enjoy the ability to choose design features that suit their preferences,” said Hall. “Whether you are looking to buy your first home or upgrade to your dream home, newly constructed homes can offer a personalized aesthetic inside and out.” Join us for the 2025 James Hardie Spring Parade of Homes on April 26-27, from 1:00 PM to 5:00 PM each day! This is your chance to explore some of the finest new homes in the area, meet top builders and developers, and get inspired by the latest trends in home design and construction. We’re excited to showcase a variety of beautiful homes in cutting-edge communities, giving you a firsthand look at what’s possible in modern homebuilding. For more details about new homes in Columbia, Missouri, reach out to us at the HBA of Columbia! Visit columbiahba.com or give us a call at (573) 443-8622. We can't wait to see you there!
If you're in the market for a new home, you may wonder about the factors contributing to the home's total cost. The National Association of Home Builders (NAHB) recently published a Cost of Construction Survey, which details the various costs of building a typical new single-family home. Many of the results show that the percentage contribution of each component has remained relatively consistent in recent years. According to the 2024 survey of home builders, the biggest single component of a new home’s total sales price is construction costs, which accounts for around 64.4%. For example, the sales price of a $665,298 house would likely factor in construction costs of approximately $428,215, or 64.4%. Survey respondents broke down construction costs into eight major construction stages: • Interior finishes (e.g., cabinets, drywall, flooring): 24.1% • Major system rough-ins (e.g. electrical, HVAC, plumbing): 19.2% • Framing: 16.6% • Exterior finishes (e.g., roofing, windows): 13.4% • Foundations: 10.5% • Site work (e.g., architecture, building/permit/impact fees): 7.6% • Final steps (e.g., driveway, landscaping): 6.5% • Other costs: 2.1% The share of construction costs to the total price of a new home is the highest since NAHB first produced the survey in 1998. Some of the factors that contribute to the construction costs are the ongoing skilled labor shortages and building material price increases. The average single-family home size in the 2024 survey was 2,647 sq. ft. of finished floor space, an increase of 86 sq. ft. from 2022. From 2015 to 2022, the average square footage of a home trended downward. Constructing homes with smaller square footage in recent years is a response by builders to meet the current housing affordability challenges buyers face. Though building practices and the cost of labor, land and materials can vary widely across the country, these national averages provide an overall snapshot for the building industry. To learn more about the home building process in Columbia, MO contact info@columbiahba.com or visit columbiahba.com
If 2025 is the year you have decided to purchase a new home, whether as a first-time buyer or a seasoned home owner, the best time to start preparing is now. Following these five simple strategies will help place you in an ideal position to find a home that is a good fit for you and your family. Take a Closer Look at Your Credit Score. The first step toward purchasing a new home is to examine your finances closely. Start by making sure you know your credit score. Your credit score will help determine the interest rate and associated costs you pay on a mortgage loan. In general, the higher your credit score, the lower the interest rate you will qualify for. Examine Your Finances. Before you search for a home, you must know how much house you can afford. Experts recommend talking to a qualified lender to help you determine your price range. As the buyer, you are the best judge of what you can realistically afford, so you should not set your home buying budget based on your maximum loan approval amount. Plan for a Down Payment and Associated Costs. Once you figure out how much you’re willing to spend, you need to set a down payment goal. The longstanding myth is that you must put down 20 percent to purchase a home. You can move forward with a home purchase with a much lower down payment. Two factors that primarily impact your down payment amount are the home’s price and the type of home loan you secure. In addition to your down payment, you must budget for loan fees and closing costs. Evaluate Your Needs. Put pen to paper, outline what you need and want in a new home and create a “must have” list. Start by thinking about why you’re ready to purchase a new home. Maybe you need a bigger space or want to move to a school district that fits your family’s needs. Creating a list of what you need in your new home will save you time when you are ready to start looking. Your next home may not meet every item on your priority list, so you must decide what factors you can compromise on and how you can stay within your budget. Sell Your Current Home. If buying your home this year is contingent upon selling your home, you should be prepared if the timing doesn’t align perfectly. Another consideration is to ensure you have sufficient funds on hand if you cannot have concurrent home closings. A real estate agent can help you navigate the transitions. A buyer or seller market makes a difference in timing the transaction, and a real estate agent and HBA of Columbia can shed light on local market factors. Contact Jami Clevenger (jami.clevenger@columbiahba.com) to learn about homeownership opportunities in the Columbia, MO area.
