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
Multifamily Housing | Dec 16, 2020
What the Biden Administration means for multifamily construction
What can the multifamily real estate sector expect from Biden and Company? At the risk of having egg, if not a whole omelet, on my face, let me take a shot.
Giants 400 | Dec 16, 2020
Download a PDF of all 2020 Giants 400 Rankings
This 70-page PDF features AEC firm rankings across 51 building sectors, disciplines, and specialty services.
Multifamily Housing | Dec 4, 2020
The Weekly show: Designing multifamily housing for COVID-19, and trends in historic preservation and adaptive reuse
This week on The Weekly show, BD+C editors spoke with leaders from Page & Turnbull and Grimm + Parker Architects about designing multifamily housing for COVID-19, and trends in historic preservation and adaptive reuse
Giants 400 | Dec 2, 2020
2020 Multifamily Sector Giants: Top architecture, engineering, and construction firms in the U.S. multifamily building sector
Clark Group, Humphreys & Partners Architects, and Kimley-Horn head BD+C's rankings of the nation's largest multifamily building sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Smart Buildings | Nov 20, 2020
The Weekly show: SPIRE smart building rating system, and pickleball court design tips
The November 19 episode of BD+C's The Weekly is available for viewing on demand.
AEC Tech | Nov 12, 2020
The Weekly show: Nvidia's Omniverse, AI for construction scheduling, COVID-19 signage
BD+C editors speak with experts from ALICE Technologies, Build Group, Hastings Architecture, Nvidia, and Woods Bagot on the November 12 episode of "The Weekly." The episode is available for viewing on demand.
Multifamily Housing | Nov 11, 2020
San Jose affordable housing project will feature a mass timber frame
SERA Architects and Lendlease will design and build the project.
Multifamily Housing | Oct 30, 2020
The Weekly show: Multifamily security tips, the state of construction industry research, and AGC's market update
BD+C editors speak with experts from AGC, Charles Pankow Foundation, and Silva Consultants on the October 29 episode of "The Weekly." The episode is available for viewing on demand.
Multifamily Housing | Oct 29, 2020
Uncertainty shades a once-soaring multifamily construction market
Demand varies by region, and by perceptions about the economy, COVID-19, and the election.