Multifamily Market Outlook: Slow but Continuing Growth for Multifamily


This article first appeared in the Eye on Housing blog from NAHB Economics 

Washington, D.C.—Amid a growing number of troubling macroeconomic reports, including two noticeably weak monthly employment reports, the slow—at times uneven—improvement for the housing and residential building sector remains as a positive factor for the nation’s economy.

That said, multifamily starts posted a significant drop in May, declining more than 20 percent. But the long-run trend continues to be one of improvement. According to the three-month moving average, starts of multifamily units in properties with five or more units now have been above a 200,000 annual rate for three consecutive months. And the Census Bureau reported that multifamily construction spending was up 6.3 percent in May and is now more than 50 percent higher than spending levels from a year ago.

Similarly, while sales of condominiums and co-ops were down nearly 6 percent in May from April’s levels, they are up more than 4 percent from levels reached a year ago.

NAHB’s quarterly survey data suggests continued growth for multifamily. The first quarter 2012 Multifamily Vacancy Index dropped to 31—the lowest level since the index’s beginning in 2003—forecasting more declines in rental vacancy rates. The Multifamily Production Index increased from 49 to 51, indicating more growth in multifamily construction ahead.

Finally, a recent Census study of shared households—households with additional adults—indicate that there is significant pent-up housing demand. That will help lift rental and owner-occupied housing demand as we see growth in labor markets.

Private Residential Construction Reaches 3-Year High in May

The Census Bureau’s newest release on construction spending showed a 2.8% increase in spending activity for private residential projects in May.. Multifamily spending increased 6.3% compared to April, and has surged more than 50% on a year-over-year basis. Posted July 5.

Pent-Up Housing Demand: Number of Shared Households Grew from 2007 to 2010

The total number of traditional, not-shared households fell by more than 700,000 (0.9%) from 2007 to 2010. In contrast, the number of shared households rose by almost 2.3 million (12.1%). Posted June 26.

HUD Study Finds 23.8 Million Homes Have Served Both Owners and Renters

HUD research shows 23.8 million homes that existed in 2009 switched back and forth between serving owners and renters since 1985. This is considerably fewer than the 54.2 million units that had been for owners consistently, but more than the 18.3 that served the rental community continuously. Posted June 22.

Existing Home Sales Decline

May existing home sales declined 1.5% from April, but are up 9.6% from the same period a year ago. Seasonally adjusted condominium and co-op sales were 500,000 in May, down 5.7% from April, and up 4.2% from the same period a year ago. Posted June 21.

Multifamily Starts Drop in May

Starts of apartments were down more than 20% in May, but the long-run trend remains positive. Under a three-month moving average, May was the third consecutive month for which five-plus starts were above a 200,000 starts rate. Posted June 19.

NAHB’s MVI Indicates Improving Conditions in the Rental Apartment Market

In the first quarter of 2012, NAHB’s Multifamily Vacancy Index (MVI) dropped to 31, the lowest it’s been since the inception of the index in 2003. For this index, lower is better. Posted June 8.

NAHB’s MPI Shows Ongoing Improvement in Multifamily Production

In the first quarter of 2012, NAHB’s Multifamily Production Index (MPI) continued to show improvement, increasing from 49 in the fourth quarter to 51.

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