Demand for multifamily housing is expected to remain strong in the foreseeable future. But multifamily construction, which has been well above “normal” levels, is likely to slow a bit, which could impact rental rates.
At the recent International Home Builders Show in Las Vegas, the National Association of Home Builders (NAHB) unveiled its latest projections for home starts and sales. The association’s members had just come off of a year in 2014, when single-family home sales jumped by 29.3% to 436,000 units, according to Census Bureau and National Association of Realtor estimates. Builders started a total of 993,000 homes in 2014, 6.7% more than the previous year.
Over the past few years, housing starts have fallen short of NAHB’s predictions about a housing recovery. Last year, single-family starts were just north of 638,000 units, or about 3% more than in 2013. But the association now thinks housing is poised to take off in 2015, and expects single-family starts to rise by 26% to 804,000 units.
NAHB is less gung-ho about multifamily construction, which “has been producing more units than in previous cycles,” observed David Crowe, the association’s chief economist. His forecast shows multifamily starts reaching 358,000 units in 2015, or only 1.7% more than last year. In 2016, the association expects multifamily starts to hit 361,000 units, or just 0.8% more than the starts in 2015.
Looked at another way, NAHB expects multifamily starts from the third quarter of 2014 through the end of 2016 to be 105% of “normal” production (“normal” being based on the average of quarterly production in the years 1995 through 2003). Over that same period of time, NAHB sees single-family starts going from 49% of normal production (which it remains convinced lies somewhere between 1.3 million and 1.4 million units) to 90%.
What remains to be seen is where the equilibrium between multifamily construction and demand finally settles. The vast majority of multifamily development is currently for rental properties. Despite low interest rates, and predictions that younger adults still want to own homes eventually, rental options remain attractive to a lot of people, particularly those who prefer to live nearer to urban centers.
But if construction slows, and rents escalate in response to scarcer availability, multifamily could reach a point of diminishing return that pushes renters into the buyer column quicker.
Related Stories
| Dec 15, 2014
SHoP Architects plans to turn NY's Seaport District into pedestrianized, mixed-use area
The scheme includes a proposed 500-foot luxury residential tower that would jut out into the harbor, extending the Manhattan grid out into the waterfront.
Sponsored | | Dec 3, 2014
Modular Space Showcase: Bringing work-life balance to energy workers in the Bakken region
To meet the demands of the booming energy business, Williston needs to provide homes, recreation centers, restaurants, hotels, and other support facilities for the tidal wave of energy workers relocating to the Bakken Shale area. SPONSORED CONTENT
| Dec 2, 2014
First existing multifamily buildings to earn Energy Star certification unveiled
River City in Chicago is one of 17 existing multifamily properties to earn Energy Star certification, which became available to this sector on Sept. 16 via a scoring system for multifamily properties that Energy Star and Fannie Mae had been developing for three years.
| Dec 2, 2014
SPARK designs urban farming housing for Singapore’s elderly population
The proposal blends affordable retirement housing with urban farming by integrating vertical aquaponic farming and rooftop soil planting into multi-unit housing for seniors.
| Nov 24, 2014
Adrian Smith + Gordon Gill-designed crystalline tower breaks ground in southwestern China
Fitted with an LED façade, the 468-meter Greenland Tower Chengdu will act as a light sculpture for the city of Chengdu.
| Nov 24, 2014
Must see: Plans released for underwater city that could house 5,000 people
The design centers around a floating, 500-meter-wide sphere linked to a resource center on the ocean floor via a 15-kilometer, helix-shaped path.
| Nov 21, 2014
Rental apartment construction soars to 27-year high: WSJ report
The multifamily sector is now outpacing the peak construction rate in the previous housing cycle, in 2006, according to the WSJ.
| Nov 18, 2014
New tool helps developers, contractors identify geographic risk for construction
The new interactive tool from Aon Risk Solutions provides real-time updates pertaining to the risk climate of municipalities across the U.S.
| Nov 14, 2014
What college students want in their living spaces
In a recent workshop with 62 college students, architects from Little explored the changing habits and preferences of today's students, and how those changes affect their living spaces.
| Nov 11, 2014
Renzo Piano's third building at London Bridge Quarter approved, will be built adjacent to the Shard
Renzo Piano Building Workshop has been granted planning approval for its residential building at London Bridge Quarter—a 26-story apartment tower dubbed Feilden House.