It's no secret that the construction sector has been lagging when it comes to showing signs that it is anywhere close to a full recovery. While single-family starts have fared considerably worse than multifamily starts, industry economists believe it is slowly but surely moving toward positive growth.
On Tuesday, Associated Builders and Contractors, Inc. hosted an online news conference to share its 2012 Construction Forecast, which featured commentary from Kermit Baker, chief economist for the American Institute of Architects (AIA); David Crowe, chief economist for the National Association of Home Builders (NAHB); and Anirban Basu, chief economist for Associated Builders and Contractors.
According to AIA’s Baker, access to credit and weak job growth are still issues holding back a much-needed recovery across each construction sector. “The construction sector, unfortunately, is the last major sector left in the economy yet to recover from this downturn we’ve been through,” said Baker. Additionally, a large inventory of distressed homes has also slowed the turnaround for new residential construction, he said.
NAHB’s David Crowe went on to reveal that new and existing single-family home sales were at record low levels for the past few years. But it is making progress: Single-family starts are projected to end this year at a 19 percent increase over 2011 figures. And 2013 starts are projected to increase by 29 percent over this year. But the good news for homebuilders doesn’t extend to the entire country. “That growth is coming from scattered markets, it's not even across the country” said Crowe.
Multifamily, on the other hand, is projected to slow down in terms of new starts in the coming years. In 2011, multifamily starts were up 56 percent. By the end of 2012, it is expected to grow 27 percent more. But in 2013, Crowe is expecting new starts to rise by only 6 percent, at 238,000 new starts. “We’ll still see an increase but it won’t be quite as dramatic, as we begin to catch up with the backlog needed to fill the rental demand,” said Crowe.
For now, multifamily will continue to ride the wave of high rental demand. Recently released data from Freddie Mac shows that for the year ending 2012, 1.5 million households moved into rental housing. And vacancy rates have dropped 2 percentage points nationally in the past two years. So single family still has a long way to go before it coaxes all these new renters back into homeownership.
"Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings. Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well," said Freddie Mac's Chief Economist Frank Nothaft.