Apartment developers are taking the plunge. In the first four months of 2008, builders started construction on new multifamily projects at a rate high above the unusually sluggish levels seen in early 2007, according to the National Association of Home Builders (NAHB).
In April, multifamily starts reached a seasonally adjusted annual rate of 340,000. That’s up from just 289,000 the year before. The rate of starts in January and February was also up significantly compared to 2007, more than making up for a slow rate of starts this March.
NAHB’s numbers include both new rental apartments and condominiums. However, experts say rental housing accounts for the increase as starts of new condominiums continue to fall. “The condo component of the multifamily sector is destined to lose more ground,” said NAHB Chief Economist David Seiders.
Some apartment developers have taken over failed condominium projects. Others have benefited from falling prices for low-rise construction materials like lumber and dry wall.
Given the time needed to entitle and finance multifamily projects, many of the apartments started this spring have been in the works for a year or more and were conceived before unsold condominiums flooded the rental markets in places like South Florida and Las Vegas.
Fears of a softening rental markets and an overall housing recession drove permits for new multifamily projects down in each of the first four months of this year, to reach a seasonally adjusted annual rate of 332,000 in April, compared to 411,000 the year before.