Single-Family Construction Down in Large Metros, Up in Rural Areas

In a sign of a soft housing market, single-family construction posted declines in nearly every geographic region in the second quarter of 2025, with the largest percentage drop of 3.8% occurring in large metro, suburban counties where most permit activity occurs. And while multifamily output also fell in large metro core counties, most other markets posted multifamily growth in the second quarter, according to the latest National Association of Home Builders (NAHB) Home Building Geography Index (HGBI) for the second quarter of 2025 released today.

“Single-family production continues to lag behind last year’s levels due to housing affordability challenges, including persistently high mortgage rates, the skilled labor shortage and excessive regulatory costs,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “Policymakers at all levels of government need to improve the business climate so that builders can build more homes by eliminating unnecessary regulations, promoting careers in the skilled trades and overturning inefficient zoning rules.”

“Multifamily market conditions remain stronger than expected, as single-family homeownership sits well out of reach for many households,” said NAHB Chief Economist Robert Dietz. “Favorable construction dynamics in low-population density areas, such as lower regulation and land costs, have boosted multifamily construction in smaller markets while the high-density areas have seen construction declines.”

The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural geographies.

The index registered declines for different-sized single-family markets in the second quarter, with the exception of micro counties, which posted a 1.8% gain, marking the fifth straight quarter of construction growth in these counties.

Though all single-family markets posted double-digit growth in 2024, declines and stagnation have been prevalent for the first two quarters of 2025. With single-family growth falling in large metros because of weaker building conditions, this led to market share gains for non-large metro counties. As a result, less densely populated areas posted their highest combined market share since the first quarter of 2023, holding 50.2% of single-family market share in the second quarter of 2025.

The second quarter HBGI shows the following market shares in single-family home building:

15.8% in large metro core counties
24.5% in large metro suburban counties
9.5% in large metro outlying counties
29.3% in small metro core counties
10.1% in small metro outlying areas
6.6% in micro counties
4.3% in non-metro/micro counties

For multifamily construction, most markets had growth in the second quarter, with small metro outlying counties recording a 22.1% increase. The high-density areas struggled, similar to single-family, with large metro core counties down 12.3% in the second quarter, marking the ninth straight quarterly decline in these large counties.

This trend of strong multifamily construction in counties with lower population densities has been a key factor as to why the multifamily sector has performed so well in 2025. Affordability conditions in the single-family market remain at crisis levels, which boosts demand significantly for new multifamily construction.

Multifamily completions continue to report quarterly highs, as new units are reaching the market throughout the year. This should help to lower shelter inflation, which has been the major driver of overall inflation, and could potentially boost the probability of Federal Reserve rate cuts later this year.

The second quarter HBGI shows the following market shares in multifamily home building: