Multifamily permits and starts continued to wane in the first quarter of 2007, due primarily to the significant contraction in condo and townhome development, according to the quarterly “Performance Monitor” by Marcus & Millichap. The report noted that approximately 2.8 percent of the homes, condos, and townhomes available for sale throughout the nation are vacant, the highest level since 1956. This will undoubtedly continue to increase the rental supply and as a result, some downward pressure on rent growth in the apartment market is expected.


During the first quarter of 2007, more than 80,000 multifamily units were permitted, down 16 percent from the number permitted one year ago. Roughly 38,000 multifamily rental units broke ground during the quarter, down from 47,000 units started in the fourth quarter of 2006.

Condo and townhome starts continue to fall as well. During the quarter, this sector accounted for only 39 percent of the total multifamily starts, down from 60 percent at its peak in 2005.

The supply index in the “Performance Monitor” provides insight into future supply by indexing permits and construction starts. It should be noted, however, that the supply index includes both apartment and condo/townhome properties. In this edition, Marcus & Millichap plotted the share of starts attributable to the condo/townhome component.

Source: Marcus & Millichap Research Services