While not quite a secret – the word is out: single family home construction continues its growth trajectory. Chief economists with the Associated Builders and Contractors (ABC), the American Institute of Architects (AIA) and the National Association of Home Builders (NAHB) in August 2016 predicted single family construction growth for the next year, as well as industry growth overall.

NAHB Chief Economist Robert Dietz explained that single family construction was increasing by more than 10 percent while multifamily production levels were slowing down. Low interest rates for home mortgages are one factor, he said, in keeping the housing market moving forward. Multifamily construction starts are down 7 percent from October 2015 to October 2016, compared with a 7 percent growth in single family units based on Principia’s view of Census data.

Principia’s analysis of Census housing permits reveals that multifamily growth is down significantly from 2015 specifically for buildings with five or more units while single family remains on an upward trend.

The largest drop in multifamily growth has occurred in the Middle Atlantic region followed by the West South Central region while single family regions experiencing the greatest growth include the East North Central, East South Central and New England regions, as shown in the table below.

Top 10 Areas for Growth – Single Family
In addition to assessing regional demand, Principia’s analysis also revealed the following top 10 states for single family growth year over year:

  1.      Florida
  2.      Georgia
  3.      North Carolina
  4.      Washington
  5.      Utah
  6.      Tennessee
  7.      Ohio
  8.      California
  9.      Idaho
  10.      South Carolina

Interestingly, the National Association of Realtors (NAR) said that demand for new homes is strong in many areas of the country – but that the number of building permits for new single family residential construction is not keeping pace. An NAR study from 2013-2015 of 171 metropolitan areas in the U.S. compared new home construction relative to job gains in these areas. The findings indicated that markets in the West make up half of the top 10 areas in need of more new single family homes. These areas are:

So, what’s driving this growth? More jobs, higher salaries, an affordable cost of living and a stronger economy. For instance, Dallas added nearly 100,000 new jobs in 2015, according to an article in Forbes online, “Building Boom Towns.

Top 10 Areas for Growth – Multifamily
Although multifamily is down overall Principia’s analysis of Census housing permits as of October 2016 reveals the following top 10 states for multifamily growth include:

  1. Colorado
  2. Illinois
  3. Georgia
  4. Arizona
  5. Nevada
  6. Oregon
  7. Kentucky
  8. Tennessee
  9. Iowa
  10. Kansas

FreddieMac’s Multifamily Outlook 2016  offers some insight into the lower numbers in multifamily construction. The report stated that an increasing number of renters becoming homeowners was a major factor in decline, with home ownership increasing significantly last year. One factor was deciding to buy before interest rates rose. A better economy and job growth also factored into this.

Other issues facing developers of multifamily units include affordable rent for occupants, an increase in construction costs – some report costs have increased 65 percent since 2010, fewer skilled tradesmen, and an increasing hourly construction worker wage.

Why These States?
Multiple states on both top ten lists regarding housing permits are also ranked as the top states to move into according to a yearly survey conducted by United Van Lines. These states include Florida, North Carolina, South Carolina, Washington, Nevada, Arizona and Oregon. The most popular reasons across the board according to the survey results were job changes and retirement. Forbes published a list of the Best Places to Retire and “The Best Cities for Millennials in 2016 earlier in 2016 and again several of these states make the top ten.

Market Effect
NAHB said that it’s not just the number of single family residential home constructions that is growing – but also it’s economic growth and an increase in the number of jobs. In its post on What Building 1,000 Homes Means to the U.S. Economy, it was statedbuilding 1,000 average single family homes generates 2,975 jobs and $111 million in taxes and fees for all levels of government.”

Multifamily housing impact on the U.S. economy is not as significant as single family as indicated in the two tables below from the NAHB:


What Does This Mean for Building Product Manufacturers, Distributors and Dealers?
The outlook is still strong for both single family and multifamily construction with single family expected to have a higher growth rate and more impact on the overall economy. Single family homes typically have unique construction amenities not found in multifamily homes. In addition to decks, oversized doors and luxury millwork, Builderonline shares some additional amenities that single home homes may include:

  •        Floor to ceiling windows
  •        Covered outdoor rooms
  •        Spa-like master baths
  •        Grand entries
  •        Larger garages
  •        Technology-friendly home; e.g., smart technologies

At the same time, building product demand used in single family homes versus multifamily homes within the growth areas could see a slight increase including:

  •        Asphalt shingles
  •        Floor tiles and solid wood flooring
  •        Decking
  •        Green building
  •        Trim, both wood and PVC
  •        Solar panels
  •        Smart home technologies, including security systems

A recent article posted on upcoming real estate predictions stated “inventory is currently down an average of 11% in the top 100 metropolitan markets nationwide.” The article also points out that again Millennials and Baby-Boomers will drive much of the home buying activity in 2017, leading to great anticipation that 2017 will be a good year for new single family home construction.

Click Here to learn more about the residential construction market and how Principia can assist with identifying product demand.