Rental Market Continues to Strengthen

June 6, 2013

The most recent data from the Survey of Market Absorption of Apartments (SOMA) showed that completions of privately financed, nonsubsidized, unfurnished rental apartments continued to climb in the fourth quarter of 2012. The reported 31,600 completions in buildings with 5+ units were slightly above the third quarter level and more than doubled since the fourth quarter of 2011. At the same time, the absorption rates (units rented or sold after construction of the property is complete) remained high, close to 65 percent. Averaged over 2012, the apartment absorption rates reached 64 percent, a level not seen since 2001.


The condo and co-ops completions remained at historically low levels – only 1,800 units were completed in the fourth quarter of 2012. However, the condo absorption rates improved remarkably. About 78 percent of the condominiums completed in the fourth quarter of 2012 were sold within three months of completions. This rate is 20 percent higher from the previous quarter and 33 percent higher from a year ago.  Over 2012 the condo absorption rates have averaged around 66 percent, marking the highest reading since 2006. Leaner inventories should bolster condo and co-op construction activity going forward, but we expect these units will maintain a diminished share of overall 5+ multifamily production.


The SOMA also reported that approximately 8,100 federally subsidized or tax credit units were completed in the fourth quarter of 2012. This represents a decline of 3,400 units since the previous quarter and 4,100 since a year ago.


Apartment Production Up Strongly Year Over Year

August 16, 2012

The Census Bureau’s preliminary estimate for starts in buildings with five or more apartments in July came in at  229,000 units (at a seasonally adjusted annual rate), up 9.6 percent from the revised figure for June (revisions to the May and June numbers were minor).

The 3-month moving average has been very stable, hovering between 205,000 and 210,000 for the past quarter.  Production in this range is a substantial improvement over the roughly 100,000 five-plus starts recorded in 2009 and 2010, or even the 167,000 last year.  The industry was consistently hitting production targets in the neighborhood of 300,000 a year for the entire decade of 1997-2006, however, so there still appears to be substantial room for improvement before apartment construction returns to a long-run sustainable rate.

On a year-over-year basis, all the five-plus numbers in the Census Bureau’s new residential construction report for July were up strongly: the five-plus starts rate was up 30.1 percent from July of 2011; the seasonally adjusted rate at which new five-plus permits were issued (274,000) was up 47.3 percent; the number of unused five-plus permits in the pipeline (44,200) was up 24.8 percent, the seasonally adjusted number of five-plus units under construction (218,000) was up 32.1 percent; and the seasonally adjusted rate of five-plus completions (209,000) was up 47.2 percent.

Starts, Permits Indicate Relative Health of the Multifamily Sector

March 20, 2012

In February, the (seasonally adjusted) annual rate of starts  in buildings with five or more apartments was 233,000, according to the latest release from the Census Bureau’s Manufacturing and Construction Division.  This is a 29 percent increase from the January starts rate  (which was revised upward slightly) and more than double the starts rate for February 2011.   Although a rate of 233,000 still appears low compared to five-plus starts over the 1996-2007 period, it is far above the trough of 2009 and 2010 and provides an indication of the relative health of the multifamily sector. 

Meanwhile, the rate at which new five-plus permits were issued increased  3 percent increase in February, to 219,000—marking the fourth consecutive month that the five-plus permit rate has been above 200,000.  Improvement in the permit rate since 2010 suggests that multifamily production will remain relatively healthy going forward, although a five-plus starts rate as high as 233,000 may not be sustainable in the short run. 

At the other end of the production pipeline, the rate of five-plus completions increased 4 percent in February, to 144,000.  As five-plus starts continue to outpace completions, the number of five-plus units under construction at any one time has been steadily climbing and is now above 190,000 for the first time since January 2010—a positive sign for any workers who may be relying on new apartment construction for employment.