MultiFamily Market Outlook - 02/26/2009 (Plain Text Version)

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In this issue:
Doing the Numbers: Quarterly Multifamily Statistical Update
Multifamily Starts Draw Closer to the Record Low
Real Rents Index Revised for the New Year
Financial Market Stability Still a Challenge
The MFSI Slides Downward at the Start of the Year

Multifamily Starts Draw Closer to the Record Low

In January, starts in buildings with five or more apartments fell to a historically low (seasonally adjusted annual) rate of 114,000 units. This is down 25% from the already weak number posted in December, and down more than 60% on a year-over-year basis. Although the 114,000 comes close, it does not quite equal the record low, as the five-plus starts rate was under 100,000 in December of 1991 and January 1993.

In January of the current year, however, starts in buildings with 2-4 units were also very weak. As a result, the preliminary rate for all multifamily starts came in at only 119,000 in January of 2009 —which does, in fact, tie the record low point originally set in 1993. Meanwhile, the Census Bureau's current release showed an unchanged rate of 166,000 new five-plus permits issued in January (unchanged from an already weak December rate that itself was revised downward slightly). The 166,000 rate of new permit issuance was down more than 50% from January of the previous year.

Reflecting these weak trends, NAHB's multifamily production forecast has again been revised downward. The forecast now calls for of total of 109,000 five-plus starts in 2009 and 122,000 in 2010. If these numbers materialize as projected, they would represent the two worst years for five-plus starts since the Census Bureau began reporting the series in 1963.