Condo Construction Market Showing Gains?

According to NAHB analysis of quarterly Census data, the count of multifamily, for-sale housing starts increased during the first quarter of 2022. At 11,000 units started, this was the best quarter for condo construction since the third quarter of 2008.

As a result, the market share of rental units of multifamily construction starts decreased to 91% during the first quarter after standing near 95% in recent quarters.  In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.

An otherwise elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to first quarter 2022 data, the average square footage of multifamily construction starts ticked up to 1,072. The median was inched down to 1,002 square feet.

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the first quarter, the one-year moving average for multifamily size was 1,056 square feet, while the median was 1,004. These measures are near more than two-decade lows. Our forecast is for size to stabilize as multifamily building moves further out from urban cores as renters seek larger, more affordable housing due to the virus crisis.  Gains for condo construction could also lift multifamily unit size.

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