Wednesday, January 19, 2011

Summary on Multi-Family Theme

by Calculated Risk on 1/19/2011 03:43:00 PM

A key theme this year will be record low multi-family completions and an increase in multi-family starts.

Here are few data points:

• The Housing Starts report this morning showed a jump in multi-family permits in December to a 172,000 Seasonally Adjusted Annual Rate (SAAR) from 107,000 in November. For the first eleven months of the year, the 5+ unit permits averaged 120,000 per month. This is volatile, but a significant increase. Update: A caution via Bloomberg:

A jump in building permits, a proxy for future construction, may reflect attempts to get approval before changes in building codes took effect at the beginning of this year.
• The Architecture Billings Index is at the highest level since Dec 2007 and mostly because of multi-family. From the AIA this morning: "Sector index breakdown: multi-family residential (60.1), commercial / industrial (52.7), institutional (50.6), mixed practice (47.8)"

Anything above 50 indicates expansion, and a 60.1 reading indicates a significant increase in multi-family billings.

I posted some thoughts from the NMHC Apartment Strategies Conference in Palm Springs yesterday:
NMHC: Is the recovery real for apartments?

Apartments: "Consensus has a high price"

It was clear from the discussions at the conference that multi-family starts will increase in 2011 and 2012.

These are the key two points: 1) there will be record low multi-family completions in 2011 (helping reduce the excess housing supply) and 2) an increase in multi-family starts in 2011 will make a positive contribution to GDP and employment growth.