Multifamily Housing Starts in 3Q Do Not Fall as Precipitously as Single-Family’s

By Anuradha Kher, Online News EditorNew York–While single-family housing starts tumbled a whopping 12 percent to an annual rate of 544,000—the lowest since February 1982 and the fourth-lowest ever—third-quarter multifamily housing starts remained relatively high at 273,000, as compared to its low of 162,000, recorded in 1993, based on the Commerce Department’s latest report.Multifamily housing starts (including two to four-unit projects and five plus-unit projects) have been falling since mid-year but haven’t yet seen the drop witnessed after the savings and loan crisis in the early 90s. 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.“The multifamily housing starts, permits and completion numbers have been bouncing around on a month-to-month basis and I try not to get fooled by this variation,” NMHC Chief Economist Mark Obrinsky tells MHN. “Having said that, the three-month average has been tapering off. Although I haven’t seen a number quite this low for a while now, I’d like to wait and see for more numbers come in before I can call it a trend. This is not nearly as bad as the drop after the recession in the early ’90s, which was followed by the savings and loan crisis.”However, Obrinsky does believe that we are in a recession right now and things are going to get worse before they get better. “As the economy gets tougher, people will start doubling and tripling up in homes, and move in with their families. For the short term, this would mean fewer renters. But once the economy starts recovering, which I believe will most likely happen in 2010, demographics will be in favor of apartments and the our industry will have to ramp up at that time,” explains Obrinsky.For Dan Fasulo, managing director of the research firm, Real Capital Analytics, the numbers show a definite downward trend. “For all practical purposes, development has stopped in this country. With debt markets seized up, developers are having a hard time getting financing. The projects under construction will be completed, but I don’t see too many new projects coming in through the pipeline,” Fasulo tells MHN.However, he agrees with Obrinsky’s observation that things are not nearly as bad this time around as they were after the savings and loan crisis. “There was so much excess oversupply and overbuilding in the multifamily industry in the late ’80s that after the 1991 recession, it took an entire decade for things to get back to normal. This time, there are certain troubled markets that are seeing excess supply, but many other markets are doing just fine,” says Fasulo. Also, he says there is money on the sidelines right now and this was not the case in the 1990s.As result, Fasulo believes, when the market does start recovering, it will be relatively easier to get back to normal. “Of course, it will be a market-by-market scenario. For example, I would not want to be a developer in Michigan. I think, going forward, investors will need to do market-by-market and asset-by-asset research for their investments,” he concludes.