Multifamily Market Outlook: Slow but Continuing Growth for Multifamily

Amid a growing number of troubling macroeconomic reports, including two noticeably weak monthly employment reports, the slow—at times uneven—improvement for the housing and residential building sector remains as a positive factor for the nation’s economy.

This article first appeared in the Eye on Housing blog from NAHB Economics 

Washington, D.C.—Amid a growing number of troubling macroeconomic reports, including two noticeably weak monthly employment reports, the slow—at times uneven—improvement for the housing and residential building sector remains as a positive factor for the nation’s economy.

That said, multifamily starts posted a significant drop in May, declining more than 20 percent. But the long-run trend continues to be one of improvement. According to the three-month moving average, starts of multifamily units in properties with five or more units now have been above a 200,000 annual rate for three consecutive months. And the Census Bureau reported that multifamily construction spending was up 6.3 percent in May and is now more than 50 percent higher than spending levels from a year ago.

Similarly, while sales of condominiums and co-ops were down nearly 6 percent in May from April’s levels, they are up more than 4 percent from levels reached a year ago.

NAHB’s quarterly survey data suggests continued growth for multifamily. The first quarter 2012 Multifamily Vacancy Index dropped to 31—the lowest level since the index’s beginning in 2003—forecasting more declines in rental vacancy rates. The Multifamily Production Index increased from 49 to 51, indicating more growth in multifamily construction ahead.

Finally, a recent Census study of shared households—households with additional adults—indicate that there is significant pent-up housing demand. That will help lift rental and owner-occupied housing demand as we see growth in labor markets.

Read the rest of the report here.