Single-family home construction declined in all major geographies in the second quarter of 2025 except for small, sparsely populated counties, according to the latest Home Building Geography Index (HBGI) from the National Association of Home Builders.
The HBGI, released on March 30 and delayed by the last federal government shutdown, tracks permit activity for the third and fourth quarters of 2025. It shows how affordability pressures and the need for more space continue to pull construction away from dense cities and toward smaller markets.
“HBGI’s data highlights how affordability and space needs are driving housing construction in underserved markets,” said NAHB Chairman Bill Owens, a home builder and marketer from Worthington, Ohio, in a release. “Larger metro areas have seen a significant decline in single-family housing while smaller and smaller areas with lower land and construction costs are gaining strength.”
For home builders, the report underscores an important change: while national single-family permits will decrease by 7.4% in 2025 compared to 2024, smaller and smaller markets are gradually gaining market share, suggesting more opportunity for builders outside of the nation’s most expensive metros.
Single family: broad decline, small regions still growing
In all county types, single-family permit activity weakened in the fourth quarter of 2025 except one. Smaller counties – low-population, low-population areas – posted a 1.6% gain. That marks the seventh straight quarter of single-family construction growth in these markets, the NAHB said.
Large metro core regions, with the highest population density, recorded the highest declines. Single-family employment in these cores fell 12.8% on an average year-over-year basis in the last quarter of 2025, the largest decline since 2023.
The changing landscape of construction is reflected in market share as well. Between the fourth quarter of 2024 and the fourth quarter of 2025:
Large metro core regions lost 1.0 percent of single-family market share.
Smaller metro core counties — the densest counties in metropolitan areas of less than 1 million — remained the largest single-family market, adding 0.3 points.
Smaller regions posted the biggest gains, up 0.6 percent, driven by continued growth in construction.
As of the fourth quarter, single-family market share stood at:
- 15.1% in major metro core regions
- 24.2% in major metro suburban areas
- 9.3% in large districts outside the municipality
- 29.4% in small metro core regions
- 10.5% in small areas outside the municipality
- 6.9% in small districts
- 4.5% in non-metro/micro regions
For builders, the data points to a long-term demand base in smaller, more affordable markets and highlights the growing risk of volume congestion in large urban areas.
Multifamily construction is going backwards in all areas
Unlike single-family, multi-family construction is ramped up by late 2025. The NAHB reported gains in multifamily jobs across all areas in the fourth quarter, the first time the entire industry has shown quarterly growth since 2023.
Growth was strongest in smaller counties, where multifamily construction rose 14.0% on a year-over-year basis for the four quarters. The weakest gains were in regions outside major metropolitan areas, which were up 1.9%.
“While single-family home construction continues to face challenges across the country, multifamily construction strengthened across all states in the fourth quarter following two years of uneven performance,” said NAHB Chief Economist Robert Dietz. “Returning growth in major metro core regions coupled with continued construction in smaller markets indicates a more balanced and geographically diverse multifamily sector heading into 2026 than in previous years.”
The market share of multifamily construction has continued to skew toward smaller, less dense neighborhoods, reinforcing the pattern that emerged at the beginning of the pandemic. From the fourth quarter of 2024 to the fourth quarter of 2025:
Smaller metro core regions saw the biggest market share gains, up 0.6 percent.
Larger non-metropolitan counties recorded the largest decline, losing 0.5 percent.
All other areas saw limited change.
Multifamily market share for the fourth quarter was:
- 35.1% in major metro core regions
- 26.4% in major metro suburban areas
- 3.7% in large districts outside the municipality
- 25.1% in small metro core regions
- 4.9% in the outer areas of the small municipality
- 3.5% in small areas
- 1.2% in non-metro/micro regions
Why this is important for home builders
HBGI data confirms that affordability barriers, high borrowing costs and land prices are reshaping where homes are built.
Builders may find strong demand for single-family and low-cost buildings in smaller metros and smaller estates, as volume in larger cores softens. There may be strong pipelines connected to smaller markets for single-family and, increasingly, multi-family projects.
