Multifamily Development Will See Uptick

Washington, D.C.--NAR has reported that pending home sales dropped in September compared with the previous month, suggesting that the road to higher sales for condos will be a bumpy one.

Dees Stribling, Contributing Editor

Washington, D.C.–The National Association of Realtors (NAR) has reported that pending home sales dropped in September compared with the previous month, suggesting that the road to higher sales—which would ultimately spur increased development—for both single-family properties and condos will be a bumpy one. The organization does, however, forecast that multifamily unit construction will increase in 2011 and 2012 compared with 2009 and 2010, as demand for that kind of property slowly recovers, especially rental but also with a condo component.

Overall, the organization said that its Pending Home Sales Index, which is a forward-looking indicator, was off 1.8 percent to 80.9 based on contracts signed in September, from an upwardly revised 82.4 in August. The index is 24.9 percent below September 2009, when it was 107.8. The data reflects contracts signed to purchase residential property, not closings, which normally occur with a lag time of one or two months, and it does not distinguish between single-family and multifamily properties.

There was considerable regional variation, with the index dropping in the Northeast 1.7 percent in September; 3.5 percent in the South; and 5.7 percent in the Midwest. In the West, however, the index rose 3.5 percent to 104.6 but is nevertheless 24.7 percent below September 2009. It isn’t clear yet whether the nationwide difficulties with foreclosure paperwork have significantly affected home sales overall by putting the kibosh on the sale of foreclosed properties.

“Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead,” NAR chief economist Lawrence Yun said in a statement. “Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves.”

A separate forecast by the NAR predicts that 2011 and 2012 will see a slow recovery for all residential property construction, including multifamily. The organization says that it expects the development of 126,000 multifamily units in all of 2010, compared with 112,000 in 2009. The near future will see an increase in construction, with 168,000 units and 206,000 units built in 2011 and 2012, respectively.

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