MultiFamily Market Outlook - 07/12/2004 (Plain Text Version)

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In this issue:
School-Age Children in Multifamily Homes? Very Few.
Starts Sink Below 300,000 — First Time in a Year
Real Rents Up — But Not by Much
Economic Forecast: Interest Rates to Move Slowly Upward
Multifamily Stock Index Hits New All-Time High

Starts Sink Below 300,000 — First Time in a Year

In May, the starts rate for units in buildings with at least five apartments fell below 300,000 (on a seasonally adjusted annual basis) for the first time in over a year. This was a decline of 16% from April's number (which itself was 6% down from March) to land at 272,000.

It's important not to read too much into a a one-month change, however, given the historical pattern of volatility in the series, and the fact that starts consistently had been running above NAHB's estimate of a sustainable long-run trend. Also, the rate at which five-plus permits are issued (which can be an indicator of future production) has been rising. The permit rate was 390,000 in May, the highest it's been since February of 2003. In recent years there has been an increase in the average size of multifamily structures. In 2003, 53% of the apartments completed were in buildings with at least 20 units, up from 46% in 2000. The share in buildings with four or more floors increased from 14% in 2000 to 21% in 2003. The trend toward larger buildings has been occurring in both condo and rental projects.