Multifamily Housing Production on the Rise as Lending Restrictions Tighten
Nationwide housing starts rose 15 percent to a seasonally adjusted annual rate of 658,000 units in September, marking the strongest pace of residential construction since April of 2010, according to figures released by the U.S. Department of Commerce. The gain was largely attributed to a sharp increase on the multifamily side, which has been trending upward due to increased demand for rental apartments. "The big gain in multifamily housing production for September was in the wake of a below-trend number in August and in keeping with characteristic volatility in that sector," said NAHB Chief Economist David Crowe. "However, there's no doubt that demand for apartments is rising as restrictive mortgage lending policies and concerns about future employment push consumers to pursue rental options." Single-family housing starts rose 1.7 percent to a seasonally adjusted annual rate of 425,000 units in September, regaining much of the ground they lost in August. Meanwhile, multifamily starts, which often display substantial swings from month to month, rose 51.3 percent to a seasonally adjusted annual rate of 233,000 units, their highest level since October of 2008. "Today's numbers are very welcome evidence that builders are putting some crews back to work on single-family homes in select markets where economic conditions are improving, and on multifamily homes in places where demand for rentals is on the rise," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB). "That said, extremely tight lending conditions for both building and buying new homes, along with stubbornly high foreclosures that are putting downward pressure on home prices, continue to weigh down new construction and corresponding job growth." Regionally, starts rose across the board in September, with a 12.7 percent gain in the Northeast, a 9.3 percent gain in the Midwest, a 15.7 percent gain in the South and an 18.1 percent gain in the West. Building permits, which can be an indicator of future building activity, fell five percent to a seasonally adjusted annual rate of 594,000 units in September following a big gain in the previous month. Single-family permits held virtually unchanged at 417,000 units while multifamily permits declined 14.5 percent to 177,000 units. On a regional basis, permit activity was mixed in September, with gains of 4.9 percent and 0.9 percent recorded in the Northeast and Midwest, respectively, and declines of seven percent and nine percent registered in the South and West, respectively. "Single-family starts showed a slight uptick for the month, which was right in line with our forecast for the third quarter and in keeping with what builders have been telling us in recent surveys regarding the emergence of improving conditions in select local housing markets," said Crowe.