Which Local Markets Track National Trends the Most: Correlations of Metro Single-Family Permits to U.S. Data


New NAHB analysis of single-family permits shows which Metropolitan Statistical Areas (MSAs) have been trending in the same direction as U.S. single-family permits. Using single-family permits from 2012-2022, five-year and ten-year correlations are used to create an association index for each MSA that describes how similar, or dissimilar, particular MSAs are when compared to the national trend. The post focuses on single-family permits, a similar analysis of multifamily permits will be posted in the coming weeks. NAHB’s purpose in developing this set of statistics, which will be updated annually, is to give local industry leaders a statistic to describe whether or not their local market typically matches overall macroeconomic conditions. And as a set of statistics, the MAI provides forecasters another variable to scale and distribute local market forecasts for home building. The Market Association Index (MAI) is created by using the average of the five-year correlation and ten-year correlations between the U.S. single-family permit level and the respective MSA. With this method, the five-year trend is weighted more than the ten-year trend because the five years overlap within both variables. The MAI correlation coefficient that is calculated for both years can range from a negative one to a positive one and measures the strength of the linear relationship between the respective MSA and the U.S. A correlation of negative one would mean there is a perfect inverse linear relationship between the two geographies, while zero means no linear relationship and a positive one represents a perfect positive linear relationship. After taking the average of the five- and ten-year correlations, the MSA percentile rank of correlation is determined amongst all MSA. This way, the MAI provides simple reading of which metro areas have single-family home building trends that look the most like national dynamics in terms of growth and contraction. The scatter plots above illustrate MSAs on opposite ends of the distribution of correlations, where Raleigh, North Carolina has the highest degree of association with the national trend while Dubuque, Iowa had the most negative correlation with respect to the national trend. In the middle of the distribution, the average correlation for Anchorage, Alaska was zero, with the graph showing no linear relationship between the two variables. Of the 383 metro areas, the average correlation is 0.495. In total, 314 MSAs had a correlation greater than a zero and 69 MSAs had less than zero. This is expected as historically in aggregate MSAs have on average, accounted for 90.4% of all single-family permits in the U.S. between 2012 and 2022. Therefore, a majority of the MSAs should follow the national trend. The map below displays the percentile rank of each MSA. Hovering over a particular MSA will display its percentile rank. MSAs in the southeast tended to have a much higher percentile rank when it comes to the MAI. MSAs in the northeast were more likely to have a lower percentile rank compared to other regions. The ten highest ranked MSAs trending to the national level are below. The ten lowest association index MSAs which are least likely to follow the national trend are below. The full single-family MAI file for 2022 can be downloaded here. ‹ Housing Affordability Remains Near Historic Low LevelTags: building permits, MAI, MSA, single-family, single-family construction

Which Local Markets Track National Trends the Most: Correlations of Metro Single-Family Permits to U.S. Data2024-02-09T09:27:02-06:00

Geography of Personal Income and Home building


By Jesse Wade on December 12, 2023 • Using the Bureau of Economic Analysis most recent release of county level personal income per capita data and Census Bureau’s county level permit data, new NAHB analysis finds that single-family and multifamily construction takes place more often in areas where incomes are higher. Counties were grouped into five quintiles by the personal incomes per capita for each county. The high quintile consists of counties where the personal income per capita is greater than $62,212. High-middle level counties are areas with less than $62,212 but greater than or equal to $53,771. The middle quintile consists of counties where personal income per capita is less than $53,771 but greater than or equal to $48,159. The middle-low income quintile consists of counties with less than $48,159 but greater than $43,533. The low-income quintile is counties where personal income per capita is less than $43,533. The highest income areas are frequently near larger cities and along the Pacific and Atlantic coasts. The lowest income counties tend to be concentrated in the southeastern portion of the US. The market shares of single-family home building for the quintiles of personal income per capita have been changing over the past five years. The highest income counties have lost 4.2 percentage points in market share, falling from 45.0% in the third quarter of 2018 to 40.8% in the third quarter of 2023. The middle-high income counties market share was the only other area to lose market share, losing 1.5 percentage points over the same time period. Both the middle and middle-low income areas gained 2.0 percentage points while the low income area gained 1.6 percentage points over the past five years. As was seen with the HBGI released last week, single-family construction has slowed across the county. All personal income per capita quintiles had a negative percentage change for the fourth consecutive quarter. The biggest decline occurred in the same quintiles that have lost market share with the high quintile declining 17.9% over the year and middle-high declining 17.1%. The low income quintile declined the least, dropping 10.0% in the third quarter of 2023. The multifamily market follows a similar story as single-family. High income areas have well above a 50% market share but have seen a decline over the past couple of years. Since the third quarter of 2018, the market share for the high-income quintile has fallen 4.8 percentage points from 65.8% to 61.0% in the third quarter of 2023. No other income quintile lost market share over this same period as the middle-income quintile gained the most percentage points in market share. The middle-income quintile market share rose 2.2 percentage points from 7.5% to 9.7% between the third quarters of 2018 and 2023. Multifamily construction declined in four of the five quintiles with the lowest quintile being the only to post growth at 35.4%. This was the eleventh consecutive quarter where the lowest income quintile had growth of multifamily construction. The middle-high personal income quintile had the largest building decline as it posted a 22.5% drop. ‹ Consumer Credit Outstanding Edges Higher in OctoberTags: HBGI, HBGI Featured Topic, multifamily construction, personal income, single-family construction

Geography of Personal Income and Home building2023-12-12T08:33:35-06:00

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