New Multifamily Rental Share Remains Strong


An elevated market share for new rental multifamily homes is holding typical apartment size below levels seen during the pre-recession period. However, as multifamily developers build more for-sale housing units in the years ahead, the average size of multifamily homes is likely to rise. The recent pattern of change in the size of new multifamily units stands in contrast to the post-recession increase in the size of typical new single-family homes.

According to second quarter 2016 data from the Census Bureau and NAHB analysis, the average per unit square footage of multifamily housing construction starts was 1,161, off from the post-recession high set at the start of 2015 (1,247 square feet). The median was 1,072 square feet for the second quarter.

MF size_2q

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the second quarter of 2016, the one-year moving average for the multifamily size was 1,153 square feet, while the median was 1,073. The current quarterly median is 1.5% higher than the post-recession low, and the average is 3% higher. Nonetheless, the typical size of newly built multifamily units remains below the averages/medians recorded during the pre-recession years, when the share of for-sale multifamily was considerably higher.

The share of multifamily housing starts built for-rent fell to a historical low of 47% during the third quarter of 2005. It is currently (93%) above the approximate 80% share recorded during the 1980-2002 period due to elevated levels of rental demand.

MF built for rent_2q

The reason for some of the change in multifamily average size is due to market mix. Renters tend toward smaller units than owner-occupiers. In 2012, for example, the median size of all multifamily units completed was 1,098 square feet. However, for rental apartments the median was 1,081, while it was a larger 1,466 for for-sale multifamily residences. When the for-sale share of multifamily returns back to historical norms in the years ahead, the size of a typical newly built multifamily housing unit will rise accordingly.

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3 replies

  1. Very, Very authentic and informative information you have shared with actual analysis. We have our vacation homes by owner in Orlando this large house can accommodate 10 guests as it has 4 bedrooms, 4 bathrooms. Its prepossessing location right on Anclote River is icing on cake. Handy attribute of this home are Highchair, Hot Tub, Refrigerator, Washer, Water Views, Dryer, Outdoor dining area, Towels provided. You can also get Eider access and wheelchair facility.

  2. With the first-time homebuyer share down almost 25%, its a safe bet that the rental market will be doing well for the foreseeable future. I often wonder if NAHB, NAR or the MBA are even curious as to why so many potential first-time buyers are not looking for a first home.

  3. Numerous people are opting to rent their home versus buying it. This article provides a lot of good quality information and analytics. It will be exciting to see what trends arise in the future. Thanks for sharing Robert.

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