Dive Brief:
- Starts for buildings with five or more units dropped 12.6% year over year to a seasonally adjusted rate of 326,000 in October, according to a monthly report from HUD and the U.S. Census Bureau. They rose by 9.8% from September.
- Multifamily developers completed an annualized 615,000 apartments in buildings with five or more units in October, a 61.4% YOY jump and a 9% decrease compared to September.
- At the end of October, 804,000 units were under construction, a 19.2% YOY decline and a 3.5% month-over-month decline.
Dive Insight:
The falloff in multifamily starts has been dramatic, as they have now dropped to the lowest level since 2013, according to Jay Parsons, head of investment strategy at Lubbock, Texas-based Madera Residential. In a LinkedIn post, he noted that the starts-to-completions gap is at the largest level since 1974.
However, overall housing starts didn’t post significant declines, falling to a seasonally adjusted annual rate of 1.3 million in October — a 4% decrease YOY and a 3.1% drop versus September. Single-family builders broke ground on 970,000 homes — a 0.5% YOY decrease and 6.9% below September’s numbers.
Developers pulled permits for a seasonally adjusted rate of 393,000 apartments in buildings with five units or more, a 20.9% YOY drop and a 3% decrease compared to September.
Although new starts are sluggish for private developers, some apartment REITs expressed optimism about breaking ground on new projects on the recent round of third-quarter earnings calls.
“We've got a cost of capital advantage relative to our private sector competitors,” Ben Schall, CEO of Arlington, Virginia-based AvalonBay Communities, said on the REIT’s Q3 earnings call.
AVB started four projects — two in North Carolina and two in Texas — and is eyeing more groundbreakings in 2025.
“We could certainly see increasing our start activity next year to something on either side of a range of about $1.5 billion — from $1.050 billion this year,” Matthew Birenbaum, AvalonBay Communities’ chief investment officer, said on the call.
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