Second Home Markets Show Construction Growth
For the third quarter of 2020, NAHB’s Home Building Geography Index (HBGI) found construction gains for traditional second home markets. High-concentration second home counties were defined based on the proportion of the local housing stock that are non-rental properties and not classified as their taxpayer principal residences. Counties with relatively high concentrations1 of such residences were designated as “second home counties.” As of 2018, Americans owned about 7.4 million second homes, accounting for 5.6% of the total housing stock.
In addition to generating a suburban shift, the COVID-19 pandemic also produced demand changes that benefitted second home communities. Single-family construction in second home markets expanded at a 13.6% average rate over the last four quarters, compared to a 10.5% pace for other counties. Moreover, single-family construction was up 23.2% on a year-over-year basis in the third quarter. And these market gains were not just for single-family construction. Multifamily development expanded at 11.1% in second home counties, while it declined by 0.9% in others during the third quarter.
Examining second home markets through the lens of the HBGI’s regional population density-based geographies shows where these traditional vacation markets are located. The data find a greater proportion of second home markets in less densely populated HBGI regional geographies, such as small towns (“micro counties) and rural areas (“non-metro / non-micro counties”). The overlay of high-concentration, second home counties by regional geographies is shown below:
Unsurprisingly, there are no high-concentration second home counties that are also large metro core counties. In fact, just under 70% of second home counties are in rural areas (“non-metro / non micro” counties), with small towns (“micro” counties) trailing at 18.8%.
Housing is weathering the ongoing economic recession well. Yet the bifurcated nature of the ongoing recovery is illustrated by some of the gains for construction in second home markets. High-concentration second home counties’ share of total single-family home building is less than 10% of the market and a smaller 5.6% for multifamily development. Yet, remote work arrangements have made it possible for some wealthier Americans to move to alternate locations that are not just small, suburban shifts from within their current metro area. More fundamentally, second home demand may also be benefitting by an acceleration of retirement plans, as well as stock market gains.
The full third quarter HBGI data can be found at nahb.org/hbgi.—
- The threshold that was selected for a county to be considered a high-concentration second home county was 15% and based on the estimated distribution of proportions among the HBGI’s 3,113 counties. The distribution was found to be heavily left-skewed, with just over 80% of counties showing less than 15% of their housing stock to be second homes.