MultiFamily Market Outlook - 01/29/2009 (Plain Text Version)

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In this issue:
New Data Confirms Low Number of School-Aged Children in Multifamily
Multifamily Starts Drop, Despite Decline in Single Family Production
Competition from Vacant Properties Puts Pressure on Rents
2009 Economic Strife Could Make Record History
MFSI in Negative Territory Three Months in a Row

Multifamily Starts Drop, Despite Decline in Single Family Production

In December, starts in buildings with five or more apartments declined by 17% from the previous month and 31% on a year-over-year basis, to a (seasonally adjusted annual) rate of 145,000. As weak as this number is, it is not a historic low. Five-plus production remained consistently below 140,000 units a year from 1991 to 1993. The difference this time is that the strong downward trend in multifamily starts is occurring at a time when single-family starts are hitting record lows every month.

Meanwhile, new five-plus permits were issued at a seasonally adjusted annual rate of 170,000 in December. This was down 17% from November, and a massive 50% from December of the previous year. In contrast to the weakness in starts and permits, the number of five-plus units under construction was down only about 3% (both monthly and on a year-over-year) basis, while five-plus completions were actually somewhat higher than they were a year ago.

One implication of this is that additional job losses can be expected in construction and related industries in the future, as the reductions in permits and starts translate into a reduced number of units under construction. NAHB's forecast of 169,000 five-plus starts in 2009 and 188,000 in 2010 assumes strong government action to deal with job loss and frozen credit markets.