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News » US » NAHB predicts stable market for multi-family housing projects » published 11 Jan 2018

NAHB predicts stable market for multi-family housing projects

The number of starts for multi-family housing projects is expected to moderate slightly this year and in 2019 but production levels will remain within the normal range, said speakers at a trade show in Florida.

“For the foreseeable future, production of multi-family housing is expected to be running at a trend level where supply is meeting demand,” said National Association of Home Builders (NAHB) senior economist Michael Neal, speaking at the association’s International Builders’ Show in Orlando.

Multi-family starts are expected to edge 2% lower this year to 354,000 units from a projected 360,000 total in 2017 and fall another 3% to 344,000 in 2019.

However, Neal noted this does not indicate weakness in the market segment. “From 1995 through 2005, multi-family starts averaged 335,000,” he said. “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.”

Ironically, one factor contributing to the stabilization of multi-family activity is the low inventory of homes on the for-sale market. “Fewer homes for sale means that some renter households looking to own will have to rent for longer than they may anticipate,” he said.

Meanwhile, the national rental vacancy rate registered a slight uptick last year, but stands at its low mid-1990s level of 7.5%.

Steven E Lawson, president of the Lawson Companies, addressed the predicted increasing demand for affordable rentals as a growing number of households are paying too much of their income in rent. “Demand is far outstripping supply and the supply-side of the equation is constrained by Low-Income Housing Tax Credit pricing, rising construction costs and higher interest rates,” said Lawson.

While the new tax reform law has significantly lowered corporate tax rates, it has also reduced tax credit prices, said Lawson.

“Rising labor and materials costs as well as falling prices for Low-Income Housing Tax Credits have changed the landscape so that some projected affordable projects are no longer viable,” he said. “Moreover, labor shortages are driving up labor costs and spreading out construction schedules.”

 

MPU

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This article was published on 11 Jan 2018 (last updated on 11 Jan 2018).

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