Production of New Apartments: Upward Trend Continues

In October, the previous month’s upward trend in multifamily production continued, as starts in buildings with five or more apartments came in at a (seasonally adjusted annual) rate of 285,000.  Although the line isn’t completely solid, buildings with at least five apartments are generally a reasonable way to draw a distinction between smaller “mom and pop” operations and  the province of professional property owners, managers and multifamily developers.

At 285,000, the Census Bureau’s preliminary five-plus starts rate for October was up 10 percent from September and up 63 percent year over year—illustrating how far the recovery in multifamily production has come from the historic trough of 2009 and 2010.  In fact, 285,000 is high enough to rank among the lower monthly five-plus starts rates recorded during what many consider to be a “golden age” of sustainable multifamily production (roughly 1997 through 2006).

Also in September, the rate at which new five-plus permits were issued dropped 10 percent, to 280,000, and the backlog of unused five-plus permits in the pipeline fell by 7 percent, to 42,600.  Both these permit numbers were up more than 40 percent year over year, however, so they aren’t a major sign of weakness (although a five-plus starts rate as high as 285,000 may be a little hard to sustain in the short run).

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0 replies

  1. This should not come as a shock to anyone paying attention. America is on track to become a nation of renters. As long as little or nothing is done to create homebuyers, many more Americans will be forced to rent and, because of increased demand, rents will continue to increase while wages remain stagnant. While this may be good for multi-family builders and investors, it is definitely not good news for your typical member. Can your membership survive another six years of doing nothing?

    • Although it took a little longer to get going, single-family production is also showing some signs of recovery. Through October, total single-family starts for the year are up 24.7% (compared to 38.9% for starts in buildings with 5+ apartments).

  2. While single family production may be up, the increase for apartments is over 150% that of single family. How much longer will it take at the present rate of increase in single family production to get back to “healthy market” levels?

    • At NAHB, we think a “healthy market” level of single-family starts is in the neighborhood of 1.4 million. A 25% per year growth rate would get us fairly close by 2016 and fully there by 2017. Our current baseline projection calls for us to hit 1.4 million single-family starts in 2016.


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