Growing Micro Markets Were A Single-family Outlier In Late 2025

Single-family home construction declined across every major geography in the second half of 2025 except for sparsely populated micro counties, according to the latest Home Building Geography Index (HBGI) from the National Association of Home Builders.

The HBGI, released March 30 and delayed by last fall’s federal government shutdown, tracks third- and fourth-quarter 2025 permit activity. It shows how affordability pressures and demand for more space continue to pull construction away from dense urban cores and toward smaller markets.

“The HBGI data highlight how affordability and space needs are driving home construction toward lower-density markets,” NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio, said in the release. “Large metro core counties saw the steepest single-family decline while smaller and micropolitan areas with lower land and construction costs gained momentum.”

For homebuilders, the report underscores a key shift: while national single-family permits were down 7.4% in 2025 compared to 2024, small and micro markets are steadily gaining market share, suggesting more opportunity for builders outside the nation’s most expensive metros.

Single-family: broad declines, micro counties still growing

Across all county types, single-family permit activity weakened in the fourth quarter of 2025 with one exception. Micro counties — low-population, low-density areas — posted a 1.6% gain. That marks the seventh straight quarter of single-family construction growth in these markets, NAHB said.

Large metro core counties, which have the highest population densities, recorded the steepest pullback. Single-family activity in these cores fell 12.8% on a year-over-year four-quarter moving average basis in the final quarter of 2025, the largest decline since 2023.

The shifting geography of construction shows up in market share as well. Between the fourth quarter of 2024 and the fourth quarter of 2025:

Large metro core counties lost 1.0 percentage point of single-family market share.
Small metro core counties — the densest counties in metro areas under 1 million people — remained the largest single-family market, adding 0.3 percentage points.
Micro counties posted the largest gain, up 0.6 percentage points, driven by continued construction growth.

As of the fourth quarter, single-family market share stood at:

• 15.1% in large metro core counties
• 24.2% in large metro suburban counties
• 9.3% in large metro outlying counties
• 29.4% in small metro core counties
• 10.5% in small metro outlying areas
• 6.9% in micro counties
• 4.5% in non-metro/micro counties

For builders, the data point to a more durable demand base in smaller, more affordable markets and highlight the growing risk of volume compression in large urban cores.

Multifamily construction rebounds across all geographies

In contrast to single-family, multifamily construction strengthened broadly in late 2025. NAHB reported gains in multifamily activity across all geographies in the fourth quarter, the first time every sector has shown quarterly growth since 2023.

Growth was strongest in micro counties, where multifamily construction increased 14.0% on a year-over-year four-quarter moving average basis. The weakest gain was in the outlying counties of large metro areas, which were still up 1.9%.

“While single-family home building continues to face challenges across most of the nation, multifamily construction strengthened across every region in the fourth quarter following two years of uneven performance,” NAHB Chief Economist Robert Dietz said. “Growth returning to large metro core counties coupled with sustained construction in smaller markets signals a more balanced and geographically diverse multifamily sector heading into 2026 than in years prior.”

Market share for multifamily construction continued to tilt toward smaller, less-dense areas, reinforcing a pattern that emerged earlier in the pandemic. From the fourth quarter of 2024 to the fourth quarter of 2025:

Small metro core counties saw the largest market share gain, up 0.6 percentage points.
Large metro outlying counties recorded the largest decline, losing 0.5 percentage points.
All other geographies saw limited change.

Fourth-quarter multifamily market share was:

• 35.1% in large metro core counties
• 26.4% in large metro suburban counties
• 3.7% in large metro outlying counties
• 25.1% in small metro core counties
• 4.9% in small metro outlying areas
• 3.5% in micro counties
• 1.2% in non-metro/micro counties

Why this matters for homebuilders

The HBGI data confirm that affordability constraints, high borrowing costs and land prices are reshaping where homes are built.

Builders may find more resilient single-family demand and lower cost structures in small metro and micro counties, even as volume in large cores softens. There could be stronger pipelines tied to smaller markets for both single-family and, increasingly, multifamily projects.