Fannie Mae Predicts Expansion of Multifamily Starts

Dees Stribling, Contributing Editor

Washington, D.C.–In its May 2010 Housing Forecast, Fannie Mae is predicting that multifamily housing starts will increase this year compared with 2009 and again in 2011. But even with those increases, the 2011 total will not be close to that of 2008, which saw the start of a lot projects planned and financed before the recession.

According to the GSE, about 284,000 multifamily housing units started nationwide in 2008. Unsurprisingly, that total cratered in 2009, when only 109,000 units were started.

For 2010, Fannie Mae is predicting 137,000 multifamily starts, or a 25.6 percent
increase over last year. In 2011, there will be 188,000 units started, or a 72.4 percent increase over 2009. But that’s still 96,000 fewer units than 2008.

“We expect a very gradual recovery for multifamily starts this year,” Doug Duncan, chief economist at Fannie Mae, tells MHN. “We project a gain for 2010, but it will be from a significantly depressed level.”

Moreover, Duncan adds, rental vacancy rates will remain historically high and lending standards for construction loans will remain quite tight. “We don’t expect that multifamily starts will increase to their long-term trend until early 2013,” he says.

The partial comeback of multifamily starts comes against a backdrop of a more general expansion in housing starts, notes Fannie Mae. Single-family residential starts will expand nearly 30 percent in 2010 compared with 2009, from 445,000 units to 576,000 units. In 2011, the GSE predicts that 856,000 single-family homes will be started, 48.5 percent more than this year.

Home prices, both single-family homes and for-sale condos and co-ops, will stabilize in the coming year and a half. For new homes, the median price in 2011 will be $215,400, compared with $215,600 in 2009. Likewise, the median for existing homes in 2011 will be $171,300, down slightly from 2009’s median of $172,500. On no account will 2011’s prices come close to those of 2008.

Home sales will temporarily pull back as the effect of the tax credit fades, but there will be some rebound later in 2010 as the impact of employment growth and consumer confidence kick in, posits Fannie Mae. International economic tempests and other hard-to-predict events remain wild cards, however.