Homebuyers Priced Out of Suburbs and into Exurbs
Single-family and multifamily home building permit applications were off on a year-over-year basis in nearly all regional markets during the first quarter, according to the National Association of Home Builders’ latest Home Building Geography Index. The one exception was “exurbs,” or outlying counties within larger metropolitan areas.
NAHB attributes the growth in these outlying areas to the increasing prevalence of housing affordability concerns. And those concerns aren’t limited to home buyers: “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,” said NAHB chairman Greg Ugalde.
Q1 growth in single-family permitting for exurbs, which represent 4.5% of the U.S. population, wasn’t spectacular at 1.6% year-over-year. But that compares to a 9.7% year-over-year decline for single-family permitting in suburbs closer to the metro area’s central city.
Multifamily permits for both inner suburbs and exurbs also were down year-over-year for Q1, although exurbs represent a smaller share of the overall multifamily development market to begin with.
Exurban permitting growth for single-family construction also compares favorably to that of other submarkets over the longer term. Over the preceding four quarters, single-family permits in exurban markets demonstrated 5.6% moving-average growth rate, compared to a 0.7% decline for single-family permits in the inner suburbs.
In reporting on the latest NAHB index, MarketWatch noted that the outward migration was seemingly cause for concern.
“Exurban areas, like the Central Valley of California, were some of the poster children of the housing bust a decade ago,” MarketWatch reported. “House-hunters were priced farther and farther away from where they worked, and when jobs dried up, it was impossible to pay the mortgage. The far-flung communities where they’d been able to buy became some of the most distressed in the country.”
However, NAHB chief economist Robert Dietz isn’t inclined to characterize the outward migration as either positive or negative. “In order to gain access to single-family homeownership, people are choosing to pay through longer commutes,” he told MarketWatch.
Buyers have other options, Dietz noted, such as townhouses in closer-in areas. Compared to a single-family home located nearer the central city, a townhouse offers less square footage but also comes in at a lower price point. The price, rather than the location or layout, may be the real driver in this case.
For comments, questions or concerns, please contact Paul Bubny
- ◦Economy
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