Demand for multifamily housing is expected to remain strong in the foreseeable future. But multifamily construction, which has been well above ânormalâ 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 associationâs 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 NAHBâs 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 âhas been producing more units than in previous cycles,â observed David Crowe, the associationâs 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 ânormalâ production (ânormalâ 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 | Jul 14, 2016
Portland, Ore., City Council approves construction excise tax for affordable housing
Expected to raise $8 million annually on commercial and residential projects. Â
Multifamily Housing | Jul 7, 2016
Courtyards make Brooklynâs Bushwick II residential development its own miniature city
Bushwick II will feature light-filled plaza spaces, a roof for urban living, and more than 800 apartment units.
Market Data | Jul 7, 2016
Airbnb alleged to worsen housing crunch in New York City
Allegedly removing thousands of housing units from market, driving up rents.
Market Data | Jul 6, 2016
A thriving economy and influx of businesses spur construction in downtown Seattle
Development investment is twice what it was five years ago.Â
Multifamily Housing | Jul 5, 2016
Apartments continue to shrink, rents continue to rise
Latest survey by RENTCafĂ© tracks size changes in 95 metros.Â
High-rise Construction | Jun 29, 2016
Best Tall Buildings around the world favor unusual shapes and hybrid functions
The Council on Tall Buildings and Urban Habitat selects winners in four regions.
Multifamily Housing | Jun 22, 2016
Can multifamily construction keep up with projected demand?
The Joint Center for Housing Studiesâ latest disection of Americaâs housing market finds moderate- and low-priced rentals in short supply.
Urban Planning | Jun 15, 2016
Swedish âTimber Townâ proposal from C.F. MĂžller provides a unique blend of nature and city
The development acts as a transition area between a traditional urban landscape and parklands.
Multifamily Housing | Jun 14, 2016
San Francisco voters approve tougher affordability requirement on new housing development
Critics charge that the measure may backfire and actually reduce new affordable units. Â
Building Team Awards | Jun 1, 2016
Multifamily tower and office building revitalize Philadelphia cathedral
The Philadelphia Episcopal Cathedral capitalizes on hot property to help fund much needed upgrades and programs.