Affordability limits new-home construction growth to exurbs
The exurbs were the only area that posted annual growth in new single-family home permits in the first quarter, highlighting an ongoing affordability battle for homebuyers and builders looking for land, according to the National Association of Home Builders.
"A shortage of buildable and affordable lots is forcing builders to increasingly look further outside of suburban and metropolitan areas to find cheaper land that provides more building opportunities," Greg Ugalde, NAHB chairman and a Connecticut homebuilder and developer, said in a press release.
The exurbs are defined as the outlying counties of major cities with at least one million residents. They only comprise about 9% of all single-family construction on a national scale, but registered a 1.6% increase in net permit growth in the first quarter compared to the same period a year ago, according to NAHB's Home Building Geography Index.
"The HBGI data is consistent with the fact that housing costs are increasing fastest in large metro suburban counties and smaller metro areas with populations under one million where demand for housing is high but supply constraints are tight," said NAHB Chief Economist Robert Dietz.
"Supply-side issues that are hurting affordability and raising costs for builders include excessive regulations, labor shortages, rising material costs and a dearth of buildable lots in mid-to-high population centers," Dietz said.
The same trend is also true for the multifamily market; in metro areas both small and large, multifamily permits declined. But in exurbs and other outlying areas where apartment building is less concentrated, there was an annual increase in multifamily construction permits.