Home Building Industry Looks Further Afield for Development

What do western film and television star Roy Rogers and jazz singers Ella Fitzgerald and Harry Connick, Jr. all have in common/? The Cole Porter and Robert Fletcher song, “Don’t Fence Me In.”

But these days, you might as well add the home building industry and its interest in the song’s line, “Give me land, lots of land.” The National Association of Home Builders says that construction of single-family and multifamily buildings has been shifting toward rural and small counties.

The organization reported that by the fourth quarter of 2021, 10.5% of all single-family home construction was in rural areas. In the same period of 2020, rural single-family home construction was a 10% share of all US SFR building. When it comes to multifamily, the portion went from 4.1% in rural areas during Q4 2020 to 6% in 2021, the highest rural share in the history of NAHB’s Home Building Geography Index.

The reason for the dual terminology of “rural” and “small” counties is because of the source data from the US Census Bureau, which defines rural areas as “micro counties” or “non-metro/micro counties.”

“Evolving market conditions were primarily responsible for the market share gains,” NAHB writes. “While the most acute effects of the pandemic are waning, a large number of home buyers continue to look outside large metro areas for their homes. An historic shortage of buildable lots is also prompting builders and developers to look further afield for places to build their communities.”

The growth pattern could continue, given that multifamily building permits in rural counties were up 90% year over year.

The change in the market came relatively late, according to NAHB economist Litic Murali.

“Until the third quarter of 2021, single-family home building’s rural market share was consistent with the market shares maintained since 2017, 10.1%,” he wrote. “In the third and fourth quarters, it posted quarterly gains of 0.2 percentage points, ending the year at 10.5%. In the fourth quarter of 2020, the share was 10.0%. Single-family home building’s growth rate in the fourth quarter of 2021 in rural counties was 15.9% on a four-quarter, moving average year-over-year basis. Its components, micro counties and non-metro/micro counties grew by 22.8% and 19.5%, respectively, by the same measure.”

Although not explicitly mentioned by the NAHB, demographic shifts would seem a likely part of the change. Significant movement to the Sun Belt and West, while pushing up populations in cities there, would also have an effect outside of major metropolitan areas.