Con Dig (04-Mar-25) Single-family home construction saw growth across all geographic regions in the final quarter of 2024, driven by a lingering shortage of existing homes, according to the latest National Association of Home Builders (NAHB) Home Building Geography Index (HBGI).

The report, released Tuesday, highlights how constrained housing inventory has kept demand strong for new homes, despite economic challenges such as high mortgage rates and tight lending standards.

“Single-family housing construction ended the year with growth as a shortage of existing homes for sale continues to increase demand for newly built homes,” said NAHB chairman Buddy Hughes, a home builder from Lexington, N.C.

The index, which tracks building activity across various urban and rural geographies, showed that single-family construction has now posted four consecutive quarters of growth. If this momentum continues into early 2025, anticipated interest rate cuts from the Federal Reserve later this year could provide an additional boost to new home construction.

Single-Family Growth Across Regions

The HBGI data showed that small metro core counties led single-family construction activity, accounting for 29.1% of market share, followed by large metro suburban counties at 24.7%. 

Other notable shares included:

• 16.1% in large metro core counties
• 9.4% in large metro outlying counties
• 10.0% in small metro outlying areas
• 6.3% in micro counties
• 4.2% in non-metro/micro counties

While single-family home construction remained resilient, multifamily construction continued to struggle in high-density areas, where growth has now contracted for seven straight quarters. The slowdown follows record-high construction activity in 2022, when builders responded to strong rental demand.

“Upside and downside risks will become clearer as the new year progresses,” said NAHB Chief Economist Robert Dietz. “An easing regulatory environment and tax cuts could act as tailwinds, but tariffs and potentially higher deficits could dampen market momentum.” He also noted that a shift away from remote work could drive increased building activity in inner suburbs in the coming months.

Multifamily Market Faces Challenges

The multifamily sector saw negative growth in high-density areas, which account for the largest share of new apartment and condo construction.

• 38.5% of multifamily construction took place in large metro core counties
• 24.9% in large metro suburban counties
• 23.3% in small metro core counties
• 4.0% in large metro outlying counties
• 4.9% in small metro outlying areas
• 3.3% in micro counties
• 1.1% in non-metro/micro counties

Despite the slowdown, the large number of multifamily units currently under construction is expected to help ease shelter inflation, which has remained stubbornly high. As inflation cools and lending conditions improve, NAHB expects multifamily construction to return to healthier levels.

With the housing market still adjusting to economic shifts, the trajectory of single-family and multifamily home construction in 2025 will depend largely on Federal Reserve policy, lending conditions, and broader economic trends.