Fannie Mae Foresees Upturn in Multifamily Starts Soon

Washington, D.C.--Multifamily property starts are set to rebound in the coming quarters, according to the June 2010 Economic Outlook released this week by Fannie Mae's Economic & Mortgage Market Analysis Group.

Washington, D.C.–Multifamily property starts are set to rebound in the coming quarters, according to the June 2010 Economic Outlook released this week by Fannie Mae’s Economic & Mortgage Market Analysis Group.

According the Government Sponsored Agency (GSE), multifamily starts registered at an annualized pace of 92,000 units during the first quarter 2010, an uptick from the fourth quarter of 2009, when the rate was 76,000 units. The number, however, was the same as in the third quarter, when starts amounted to 90,000 units on an annualized basis.

On the whole, data from those quarters show that multifamily development has been in the doldrums during 2009. A total of 284,000 units were developed in 2008, compared with 109,000 units the following year. For the purposes of the report, multifamily is defined as residential properties with two or more units per building.

According to Fannie Mae, 2009 might also be a tough year when compared to 2010 and ’11, though neither of those years will be anywhere as difficult as 2008. In 2010, the GSE estimates, a total of 132,000 multifamily units will start, while in 2011, there will be 188,000 units started.

The quarterly start estimates for both 2010 and ’11 will reflect a slowly increasing rate of development, with no drastic swings in either direction expected. Rather, there will be a moderate upswing in starts as the quarters progress.

In the second quarter of 2010, for instance, the GSE is forecasting an annualized rate of multifamily starts of 120,000 units, with the third quarter tally being 150,000 units and the fourth quarter 165,000 units. The next year picks up, with the first quarter 2011 forecasted to register an annualized rate of 172,000 multifamily starts.

The modest recovery of multifamily starts will come against a backdrop of a modest recovery for the U.S. economy during the remainder of this year and into 2011, according to Fannie Mae.

“Private employment is the key for a sustained economic recovery,” notes the report. “It appears that private employment troughed in December 2009 after peaking in December 2007, showing a peak-to-trough drop of 7.3 percent. So far, payroll gain in the private sector has been sluggish, showing an increase of only 0.5 percent from its trough.”

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