Construction of single-family homes seeing a decline in major cities, yet an increase in rural territories

The housing market in the United States is experiencing a mixed picture, with the multifamily sector showing resilience despite the struggles in the single-family market. According to the National Association of Home Builders (NAHB), this trend is partly due to the increased demand for affordable housing.

In the second quarter of 2025, the multifamily sector posted growth in most markets, with the exception of large metro core counties. These areas experienced a 12.3% decrease in multifamily construction, marking the ninth straight quarterly decline. However, less densely populated areas have seen market share gains due to these declines, resulting in their highest combined market share since the first quarter of 2023.

The Housing Market Index (HBGI), a quarterly measurement of building conditions across the country, attributes this trend to the affordability conditions in the single-family market, which remain at crisis levels. This boosts demand significantly for new multifamily construction.

NAHB Chairman Buddy Hughes calls for policymakers to improve the business climate for builders by eliminating unnecessary regulations, promoting careers in the skilled trades, and overturning inefficient zoning rules. He and NAHB Chief Economist Robert Dietz emphasise the need for policymakers active in various regions to address the reduction of redundant regulations, support trades careers, and repeal inefficient land-use policies.

The strong performance of the multifamily sector is not without its benefits. The high number of new multifamily completions could potentially lower shelter inflation and boost the probability of Federal Reserve rate cuts later this year. Moreover, the multifamily sector continues to report quarterly highs in 2025.

On the other hand, single-family construction has been on a downturn. Single-family construction decreased in nearly every geographic region during the second quarter of 2025, with the largest decline of 3.8% in large metro, suburban counties. The National Association of Home Builders attributes this decline to housing affordability challenges, high mortgage rates, skilled labor shortage, and excessive regulatory costs.

Despite the strong growth in 2024, all single-family markets have experienced declines and stagnation for the first two quarters of 2025. The HBGI registered declines for different-sized single-family markets in the second quarter of 2025, with the exception of micro counties, which posted a 1.8% gain.

In a positive note, small metro outlying counties recorded a 22.1% increase in multifamily construction in the second quarter of 2025. This growth, coupled with the resilience shown by the multifamily sector, offers a glimmer of hope in an otherwise challenging housing market.

As we move forward, it will be interesting to see how these trends evolve and how policymakers respond to the calls for action from the NAHB. The housing market remains a critical component of the U.S. economy, and its health is closely tied to the well-being of countless households and businesses.

Construction of single-family homes seeing a decline in major cities, yet an increase in rural territories