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Wednesday, March 16, 2011

Multi-Family Housing Starts and Completions

by Calculated Risk on 3/16/2011 02:04:00 PM

Although the number of multi-family housing starts was down in February to 96,000 at a seasonally adjusted annual rate (SAAR) (see Housing Starts decrease sharply in February), the number of multi-family starts can vary significantly month to month.

In general multi-family housing starts are trending up. Apartment owners are seeing falling vacancy rates, and some have started to plan for 2012 and will be breaking ground this year. We can see this in reports from architects and from comments at the NMHC apartment conference:

The expectations are for a record low supply completed this year (2011). Some pickup in completions next year (2012), and then plenty of completions in 2013.
The following graph shows the lag between multi-family starts and completions.

Multifamily Starts and completions Click on graph for larger image in graph gallery.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

Notice that the blue line (Starts) is now trending up, and the red line (completions) is still falling. Since it takes about 13 months on average to complete a multi-family building, the low level of starts in 2010 means a low level of completions in 2011.

In summary: For 2011, we should expect multi-family completions to be at or near a record low, and an increase in multi-family starts.