The multifamily sector has led the way in the recovery of the overall housing market and will continue to do so over the next several years, said panelists during a press conference at the National Association of Home Builders (NAHB) International Builders' Show (IBS) in Las Vegas. The multifamily market has recovered substantially since the end of 2010 and now stands at about 70 percent of the way back to a sustainable level.
"Last year was a banner year for the multifamily market, and our baseline forecast calls for further steady growth in the rate of multifamily production," said NAHB Chief Economist David Crowe. "We are forecasting construction of 299,000 new multifamily residences in 2013. While this is an improvement from just a few years ago, it is still well below the 350,000 units that are required to keep supply and demand in balance."
Although the forecast calls for an increase in multifamily production, developers see several difficulties that could hinder a full recovery.
"A lack of capital is restraining the ability of developers in many markets across the country from being able to build apartment communities for residents of all income levels," said Michael Costa, president and CEO of Highridge Costa Housing Partner LLC in Gardena, Calif. "Additionally, we are being faced with increases in the cost of building materials and construction labor, which makes it infeasible to build in certain circumstances."
There are several reasons for optimism, however. "The market continues to improve as new household formations generate demand, especially in the market-rate rental segment," said Lance Swank, president of The Sterling Group in Mishawaka, Ind. "There is also a change in attitude toward renting--people like the flexibility it gives and the option to be able to easily move to another city or state for a job opportunity."