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As Apartment Building Falls, So Does the New Construction Marketplace

by Peter Thomas Ricci

October provided yet more evidence of how integral multifamily building is to the current new construction economy

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October was a rough month for new construction, with housing starts falling 11 percent from September and 1.8 percent from Oct. 2014 to a seasonally adjusted annual rate of 1.15 million, according to new numbers from the U.S. Census Bureau.

Although single-family starts were up 2.4 percent year-over-year, multifamily starts posted big declines, falling 8.4 percent yearly and 25.5 percent monthly, and effectively dragging the market down with it. Multifamily building, given its long timelines, is notoriously erratic month to month, and its negative impact on the overall construction marketplace in October is yet another sign of its current importance to housing.

The Rise of Multifamily Construction

In October, multifamily building comprised 30.85 percent of all construction activity, a substantial increase from years past; in Oct. 2010, multifamily’s share was just 17.13 percent, and in Oct. 2005 (at the height of the housing bubble), it was 14.14 percent.

That rising share, though, does not mean more condos are hitting the market. As more in-depth numbers from the Census Bureau show, 93.8 percent of multifamily construction in 2015’s third quarter was intended for rental units, while 93.4 percent of all of 2015’s multifamily building has been for rentals.

The Future Looks Bright

Despite new construction’s missteps in October, the Census Bureau’s stats on building permits point to a brighter future, especially for the single-family market. According to the bureau, overall building permits were up 2.7 percent year-over-year to a rate of 1.12 million, while single-family permits rose 9 percent to a rate of 711,000.

Multifamily permits, meanwhile, were down 7.1 percent year-over-year, an uncharacteristic slide for the market. Granted, even with that decline, multifamily permits remain substantially higher than in years past – since Oct. 2010, for instance, permit activity is up 214 percent.

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