Multifamily Housing Starts Predicted to Fall 6% in Dollar Volume in 2009

By Anuradha Kher, Online News EditorWashington, D.C.–Multifamily housing will retreat six percent in dollars and eight percent in units, after the sharp plunge witnessed during 2008, according to McGraw-Hill Construction’s 2009 Construction Outlook.“The condo boom has dried up and financing is difficult to get, especially with the CMBS having disappeared,” Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, tells MHN. “Demand for multifamily has been negatively impacted due to the weakening job market. While down significantly, the multifamily housing starts haven’t been as severely impacted as single-family.”This is in line with the Commerce Department’s latest report showing that multifamily housing starts (including two to four-unit projects and five plus-unit projects) have been falling since the middle of 2008. The number of multifamily starts in June stood at 426,000, went down to 305,000 in July and further down to 254,000 in August. According to the McGraw-Hill report, this trend will continue into 2009.“Decline in housing starts in terms of number of units has been severe in four out of five regions. The exception is the South West Central region,” says Murray. “In 2009, we are expecting the housing starts to decline in all regions between five to 10 percent.”While New York continues to be the number-one market for multi-housing, in number of units, it was down in the first nine months of this year by 43 percent. Meanwhile, Dallas, which is the number-two market for multifamily housing, is 19 percent up in the same time period.“Next year, we are looking at a 10 percent drop in number of units in New York,” says Murray.The McGraw-Hill report predicts that there will be a drop in overall U.S. construction starts for next year, as the tough funding environment continues, construction projects are deferred and financial stress gradually eases. Against this backdrop, the level of construction starts in 2009 is expected to decline 7 percent, to $515 billion, following a 12 percent decline predicted for 2008. “The speed and scope of the events in September and October were startling,” says. “Tighter lending standards are a major constraint for the construction industry.”