The U.S. housing market continued to cool down in the fourth quarter of 2022, with homebuilders reducing their focus on single-family construction. The National Association of Home Builder’s (NAHB) Home Builder’s Geography Index (HBGI) revealed that the year-over-year growth rate for single-family construction declined across all submarkets , except for micro counties.

The HBGI uses county-level data for single and multi-family permits to measure building conditions and gauge housing construction growth in urban and rural areas. Tightening monetary policy to curb inflation and higher mortgage rates have had an outsize impact on new construction activity. Urban core markets of small and large metropolitan areas accounted for 47.2% of the single-family market in Q4 2019, but this share declined to 44.5% in Q4 2022. In contrast, the rural market share increased from 9.4% in Q4 2019 to 11.8% in Q4 2022.

The figures show a steady change in consumer preferences away from living in densely populated locations, as homebuilders zero in on micro counties and non-metro micro counties. While many factors could be driving this shift, housing affordability issues are likely playing a significant role in the increased demand for single-family homes in rural areas. In addition, rural counties often have fewer and less expensive building regulations than their urban counterparts.

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