May 28, 2009 03:37 PM

Multifamily Builder Optimism Begins To Emerge

By Building Experts Team

Has the housing sector seen the worst of the recession? While not completely confident, first quarter results from the Multifamily Rental Market Index (MRMI) and the Mutifamily Condo Market Index (MCMI) hints that optimism has permeated the multifamily segment. A segment that many feel is responsible for much of the trouble in the housing industry (as expected, that’s not a sentiment that they share).

Urban Blueprint

“Multifamily builders are beginning to see slight improvement in the current market for new rental and for-sale units, and anticipate even better times in the next six months,” said David Crowe, NAHB’s chief economist. “The components of the index measuring customer interest rose significantly; the index level calls from prospective renters rose 14 points, to 50.9, and the index reflecting traffic in prospective condo buyers jumped 25 points.”

The news reported by NAHB on Tuesday also states that “the near future appears more promising to builders than any time since the first quarter of 2008.”

A recent Newsweek article does not paint the same picture of confidence, stating, “U.S. housing starts hit a record low, dropping 12.8% in April, to an annual pace of 458,000. Housing starts are down 79.9% from their peak in January 2006. A sharp drop in construction of multifamily dwellings drove the reading, with single-family starts actually up 2.8%.”

The demand for multifamily rental dwellings is still seeing high vacancy rates, however the MRMI and MCMI are reporting higher numbers for calls from prospective renters after low reporting for two consecutive quarters, including condo traffic.

David Crowe continues, “the stock of existing homes for rent and for sale is greater than the consumer demand right now, and is in direct competition with new supply. As that inventory is absorbed, and is new households form during the economic recovery, the demand for multifamily rentals will rise, and production will return to a more ‘normal’ level.”

It will be interesting to see if the next couple months continue to show the same progress in prospective renters/owners or if this confidence is just wishful thinking.