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Apartment building expected to dip this year


Homebuilders are forecasting fewer multifamily starts over the next two years after several years of above-average apartment construction. 

Multifamily starts are predicted to average around 354,000 units in 2018, which would be down by 2 percent from the projected 2017 level of 360,000 units, according to the National Association of Home Builders (NAHB).

housestarts(1)Starts are expected to fall another 3 percent in 2019, to an estimated 344,000 units, NAHB said.

The trade group emphasized that the lesser activity does not suggest that the market is weakening. The level of multifamily starts will still fall within the normal range. 

"For the foreseeable future, production of multifamily housing is expected to be running at a trend level where supply is meeting demand," NAHB Senior Economist Michael Neal said.

"From 1995 through 2005, multifamily starts averaged 335,000," Neal continued. "Construction activity during the past four years has been running above this trend, and we are seeing the market stabilizing near more normal production levels."

While multifamily building has been strong and has kept pace with demand during the housing recovery, single-family starts have run well below the historic levels of more than a million new homes per year. Analysts say there now is shortage of homes for sale in some cities. The lack of affordable houses for sale, however, has helped sustain demand for apartments, according to NAHB.

The national rental vacancy rate ticked up slightly last year, but stands at its low mid-1990s level of 7.5 percent, the trade group said.

"Fewer homes for sale means that some renter households looking to own will have to rent for longer than they may anticipate," Neal said.

Multifamily starts were on an annualized pace of 359,000 units in November, according to the U.S. Census Bureau. That was up by 11 percent year over year; however, the monthly estimates have bounced around over the past year. Over the last 12 months, multifamily starts reached a high in December, when the annualized pace reached 449,000 units, according to Census Bureau data. 

NAHB released its latest forecast on Wednesday during a news conference at the NAHB International Builders’ Show in Orlando.


 

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