The editor of the Multifamily News Minutes on the Sales, Inc. website today reported new multifamily home construction is growing at a steady pace nationally.  The growth numbers show good signs which correlate to the housing market activity currently taking place in Washington D.C., Houston and North Dakota.  


The editor of the Multifamily News Minutes on the Sales, Inc. website today reported new multifamily home construction is growing at a steady pace nationally.  The growth numbers show good signs which correlate to the housing market activity currently taking place in Washington D.C., Houston and North Dakota.  


Sales, Inc. is a housing industry leader and one of the biggest apartment leasing firms in the country.  The official name of the report is “Multifamily News Minutes – Jan 7, 2013 December Wrap-Up”.  The topics covered in the publication and multifamily video include:


·         New Multifamily Construction Growing

·         7 Years of Optimism for Multi-family Construction Demand

·         New Jersey, Another Example of Robust Multifamily Growth

·         U.S. Multi-Housing Vacancy Rate to Rise Slightly in 2013


New Multifamily Construction Growing


It’s been a strong fall season for multi family construction, with last month’s architectural billings index rising for the fourth consecutive month, according to the American Institute of Architects’ latest report. This is good news since earlier this year new multifamily construction was at an all-time low. The new index of 53.2 is the highest score seen since November 2007. This trend in growing demand for architecture services is linked, experts say, to jobs numbers. The Bureau of Labor Statistics reported adding 2,400 engineering and architecture jobs this fall, a major factor in cross-sector growth. For the multifamily housing sector, the index reads 55.9, the fifth consecutive month of gains.


Those following the Multifamily market know that new multifamily construction was in very bad shape earlier this year, at nearly 60% below the long-term average.  Coupled with a surge in rental demand, March of this year saw a 2.5 million unit imbalance favoring the demand side. These growth numbers are good signs and correlate to the activity we have seen in markets such as Houston, Washington D.C. and oil boom North Dakota.


Millennials, or that tech-savvy age group who is now entering the workforce, will also be satisfied by an increase in construction as that group tends to prefer Class-A properties in highly desirable areas.




Architectual Billings Index:




7 Years of Optimism for Multi-family Construction Demand


The emerging housing recovery is cause for optimism amongst multi-housing construction firms. According to the National Multi Housing Council, household ownership rates are projected to decrease from today's 65.5 percent to 63.2 percent over the next seven years as a result of a growth in the renter's share of new households, according to the National Multi Housing Council's annual newsletter.


Historically, apartments have made up approximately 45 percent of the housing market share, but the recent housing bust caused a decrease in new apartment supply as homeowners transitioned into rental properties. This gain was, however, mitigated by the increase in Single-Family rentals.


The report has several projected scenarios for new housing construction, of which the narrowest growth would add at least 240,00 new multifamily households. The largest amount of growth, of at least 1.2 percent would create demand for 437,000 new multifamily properties each year until 2020.




NMHC Makes Optimistic Claims for Multifamily’s 7-year New Construction Demand


 New Jersey, Another Example of Robust Multifamily Growth


The multifamily market is heating up in the Garden State. Investors eager to close deals before the end of the year, particularly before the Bush-era tax cuts expire as a result of the fiscal cliff, have driven sales for a New Jersey firm 50 percent during the fourth quarter compared to last year. The velocity of multi-family sales is expected to slow in the beginning of 2013, especially if the capital gains tax rate is raised. A squeezed supply chain of new development coupled with rising  demand for rental units offers landlords greater leverage to increase monthly rent by a projected 4.2 percent.


With multifamily properties still maintaining their reputation as one of the safest returns on investment, and the supply pool continuing to shrink from lagging construction, competition among investors for New Jersey apartment buildings ramped up in the fourth quarter of 2012, though a local multifamily expert said sales activity will cool down at the start of 2013 — especially if the capital gains tax rate spikes from 15 percent to 23.8 percent on Jan. 1.


Despite the looming fiscal cliff, Thomas McConnell, a senior associate at the Elmwood Park office of Marcus & Millichap said that sales pace could continue through 2013 if interest rates on multifamily loans are held at today's extremely low levels, though "if they tick up even a little bit, I think sales and sales prices will drop."


At the same time rents are expected to edge upwards. It is anticipated that effective rents will reach $1,313 a month by Dec. 31 — a 4.2 percent increase from the start of the year, compared to the 2.3 percent increase in 2011.


Don’t let the average fool you, however, there are great differences in demand fundamentals between Class-A and Class-C property types.


"While the newer class A product built near a transit hub has a different rent margin altogether, the majority of the product out there are older garden communities that have been in existence since the '60s, and haven't been updated in years," McConnell said. "So, for the market as a whole, I think rents are now as high as they'll get."




 U.S.Multi-Housing Vacancy Rate to Rise Slightly in 2013


And finally, the U.S. multi-housing vacancy rate is expected to rise slightly to 5.3 percent in the New Year, even as the multi-family housing market continues expansion from 2011, according to the most recent CBRE Group Inc. study. Newly completed construction as well as diminishing demand will drive the vacancy rate from 4.5 percent reported in the third quarter. Researchers forecast the rate to drop to 5.2 percent by the end of next year.


Geographically, CBRE projects that top-performing multi-housing markets will be those with heavy concentrations of high-tech employment, most notably San Francisco, Denver, Austin, and Atlanta. Those markets where total employment has already surpassed pre-recession peaks, such as Houston and San Antonio, are also expected to do well. Finally, strong cyclical recoveries in rents are also expected to start in some of the cities hardest by the housing boom going bust. These markets, which include Orlando and Phoenix, should lead the country in rent growth.


“It is a great time to own multi-housing properties: apartment demand is benefiting from the slowly recovering economy as well as rapidly expanding pool of renter households,” said Gleb Nechayev, Senior Managing Economist, CBRE Econometric Advisors.  


Rents have now surpassed previous peaks in most markets and vacancy rates are below historical averages. The market entered an expansion phase in late 2011 and since then fundamentals have continued to improve steadily. New supply has also picked up considerably as a result of strong fundamentals. Completions are on track to return next year to the 1998-2008 annual average of about 190,000 units. At the same time, CBRE anticipates that growth in demand will slow leading the vacancy rate to tick up back to its historical average of 5.3%.




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About SALES Inc.


SALES, Inc. was established in 1988 with the mission of assisting property owners and property management firms to quickly solve their vacancy challenges. Since that time, we have leased over 1600 communities nationwide.  The company is a national apartment leasing firm who will help you achieve your occupancy goals fast. As the top leasing firm in the U.S., SALES, Inc. has leased thousands of apartments in every market throughout the nation thus creating increased cash flow and higher property values.




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