Multifamily housing experts had some good news for developers at the International Builders’ Show: Demand for multifamily housing is still strong, and the number of renters is set to grow.
The National Association of Home Builders (NAHB) reports that 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.
The trade organization’s chief economist, David Crowe, said 850,000 new households will be formed this year. These households consist primarily of 25- to 34-year-olds, who make up a substantial portion of the renter demographic.
The multifamily builder index, which measures how confident builders are in the market, provides another good market indicator. The quarterly index has been above 50 (on a scale of zero to 100) for three consecutive quarters, indicating that more builders are optimistic than not. The index is currently at 52.
NAHB is forecasting 299,000 multifamily starts this year and 317,000 in 2014. However, that’s below the 350,000 units needed to maintain market balance.
Lance Swank, CEO with Indiana-based multifamily developer The Sterling Group, said the industry is “seeing a golden age for multifamily,” but also that there are still some constraints to help prevent overbuilding. One of those is the cost of building materials and labor. To know how your house would look like if you’re building one, visit https://house-rendering.uk/.
“In the last six months, I’ve seen costs rise 15 percent, and they’re going up rapidly,” Swank said.
Lack of capital to build new projects is another constraint.
Sharon Dworkin Bell, NAHB senior VP for Multifamily and 50+ Housing, said right now capital prefers high-risk, high-return, urban in-fill product that’s more expensive.
“We need to continue to focus on typical, suburban garden apartments in the secondary and the tertiary markets,” she said.
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