Builders and developers are optimistic about apartment construction for the long term, according to the National Multifamily Housing Council’s (NMHC’s) quarterly survey of leading construction and development firms conducted in late June.
Nearly half of the respondents, 46%, said they anticipate conditions improving over the next six to 12 months compared with only 14% who expect conditions to decline.
However, respondents remain cautious for the near term. The majority, 77%, said they expect conditions to remain unchanged for the next three months, while 13% expect conditions to decline and 10% are optimistic for improvements.
Even with longer-term optimism, respondents noted concerns over rising expenses, with 37% of builders and developers expecting construction costs to increase faster than the rate of inflation over the next six to 12 months. In comparison, just 14% expect costs to decrease or increase at a slower rate than inflation.
“Inflation has picked up notably over the past few months,” noted Chris Bruen, NMHC senior director of research and chief economist. “Consumer prices rose by an annualized rate of 8.2% between February and May, according to the Consumer Price Index, and respondents to this month’s construction survey expect this to translate to higher construction costs over the coming year.”
Here are some other key findings from the quarterly survey:
- Over half, 51%, of the respondents said they expect equity to become more available over the next six to 12 months compared with 10% who cited less available;
- 28% said they expect debt financing to become more available over the next six to 12 months compared with 7% who reported less available;
- 55% noted multifamily starts were unchanged compared with three months ago; and
- 20% reported fewer construction delays compared with three months ago.