Four Charts that Show the Pandemic Home Building Shift

The COVID-19 pandemic altered many things about daily life, and home building is no exception.

Rising home prices, shrinking inventory, and the ability to work remotely shifted housing demand away from major metro areas to more affordable suburbs and small metros.

This shift is not only changing where people buy homes, but where homes are built. And this has implications for employment, cost of living, and infrastructure.

The National Association of Home Builders (NAHB) has been tracking home building on the county level since 2016. This data paints a picture of how the pandemic has shifted home building and gives a look into the future of housing inventory.

The Home Building Geography Index

The Home Building Geography Index (HBGI) uses housing permits to measure housing construction growth in various submarkets across the U.S. It’s updated quarterly using county-level information, which provides a detailed look at the state of home construction.

The following charts show how single-family housing construction has changed during the pandemic.

Large metro core counties are losing market share to small metro core counties

After remaining relatively stable for four years, single-family home construction in large metro core counties started falling at the beginning of 2020. Meanwhile, construction in small metro core counties hit a 5-year peak in the third quarter of the same year.

Construction in large metro suburban counties, which had been losing share since 2016, reversed course in the second quarter of 2020 as demand shifted away from large metro core counties.

Small metro outlying counties also saw a rise in market share, increasing from 8.6% in Q1 2020 to 9.0% in Q1 2021.

Small metro outlying counties are showing the fastest year-over-year growth

It’s no secret that housing demand is shifting away from large metros. But where exactly is it going?

Well, based on year-over-year HGBI growth rates, single-family home construction is increasing the fastest in small metro outlying counties -- way outside of the major metro areas.

The top three county types, by growth are:

1. Small metro outlying counties
2. Large metro outlying areas
3. Non metro/micro counties

It should be noted that the pandemic greatly affected 2020 housing data, which is reflected in 2021 year-over-year figures.

Nonetheless, it’s a stark contrast between pre- and post-pandemic housing construction growth rates. This is especially true in large metro suburban counties and non metro/micro counties that saw negative growth at the end of 2019 and are now among the fastest growing submarkets.

Counties with low commutes are growing the fastest

It’s official: people hate commuting.

After more than a year of negative growth, single-family home construction growth rates skyrocketed in counties with the lowest commute times. This submarket went from -7.9% to 22.2% year-over-year growth in just six quarters. Minimal commute counties are now growing faster than any other such submarket.

Counties with at least 6.6% work-from-home workers are also growing rapidly in terms of single-family home construction. After showing the slowest growth of all submarkets at the beginning of 2020, work-from-home counties surpassed medium commute time counties in the first quarter of 2021 and are gaining on longest commute counties.

Lower diversity counties surpassed higher diversity counties

Higher diversity counties had faster single-family home construction growth rates for the better part of three years. However, the pandemic substantially slowed growth in these counties.

This is noticeable by a sharp decline from the fourth quarter of 2019 to the first quarter of 2020.

Meanwhile, single-family home construction in lower diversity counties continued to increase their growth rate throughout 2020, surpassing their counterparts in the fourth quarter of 2020.

The future of single-family housing inventory

Low inventory has been pushing up home prices all throughout the pandemic. This is likely to continue until labor shortages and supply chain issues fully recover from the pandemic. An early look at housing construction data previews where inventory is recovering the fastest, and it’s pointing as far away from large metro areas as possible.

In the large metro core counties, where construction is losing market share and growing at the slowest rate, it seems inventory relief is not something homebuyers should hold their breath for.

Meanwhile, home construction is gaining market share and growing at the fastest rate in small metros and outlying areas -- but it remains to be seen whether new inventory will relieve rising prices or exacerbate them.