By Peter Ricci
The multifamily housing sector has been a true anomaly; while housing construction has bounced along on a largely sideways path for most of 2012, multifamily housing has been booming, with multifamily housing starts up 30 percent year-over-year in July and permits up 47 percent; in August, permits were again up, climbing 24 percent to their highest level in four years.
Some housing analysts, though, are beginning to ask an intriguing question, as housing slowly recovers – once the single-family market comes back, what will happen of the multifamily housing boom?
Contributing Factors to the Multifamily Housing Boom
The reasons for this jump in activity will be obvious to anyone who follows our site or housing news in general:
- Tight credit markets, low credit scores and floundering housing inventory have all pushed demand for rentals to some of their highest levels in decades.
- Asking rents, at the same time, have risen right alongside demand.
- As Atlantic Cities and other prescient observers have noted, there’s also a strong cultural element to the shift toward multifamily housing, as millenials forgo sprawling, car-dependent suburbs for dense urban areas.
- And the data supports that trend – according to new studies by Pike Research, though single-family homes have grown in square footage and numbers the past six decades, their total area is expected to shrink by nearly four billion square feet by 2021, which will be the first increase in urbanization for the U.S. since World War II.
- Pike senior research analyst Eric Bloom put it into perspective: “By 2021, over one-fourth of the residential stock of the United States will be in multi-unit residential buildings.”
So Where is Multifamily Housing Heading?
This may seem like a roundabout way to answer the question we posed at the start of this article, but by this point, the data should be clear – multifamily housing is not going anywhere. Though single-family housing construction will certainly come back in the next four, five years as the market recovers and housing inventory balances out, there will not be an immediate about-face for consumers from multifamily housing to detached, single-family housing; all the evidence seemed to contradict that scenario.