Category: National

U.S. Housing Starts Fall on Retreat in Apartment Building

U.S. new-home construction declined in April as fewer starts of apartment projects outweighed a modest improvement in single-family structures, government figures showed Wednesday.

Highlights of Housing Starts (April)

Residential starts fell 3.7% to a 1.29 mln annualized rate (est. 1.31 mln) after revised 1.34 mln pace in prior month Multifamily home starts slumped 11.3% after a 13.6 percent March increase; single-family rose 0.1% Permits, a proxy for future construction of all types of homes, fell 1.8% to 1.35 mln rate (matching est.)  Report included revisions to housing starts dating back to 2013 and building permits to 2012.

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Apartment Market Weathers the Storm of New Supply

Apartment landlords can no longer raise rents like they used to. So many new apartment units are opening that the percentage that vacancy is inching higher across the country.

This year “will likely remain challenging for many landlords and apartment investors,” says Victor Calanog, chief economist and senior vice president in the New York City office of data firm Reis Inc.

Strong demand for apartments has helped limit the damage from new supply. Apartment rents are likely to keep growing on average through 2019, even though rents are not growing nearly as much as they used to.

“Short of a recession—which not even the Federal Reserve’s Comprehensive Capital Analysis and Review projections are expecting any time this year—apartment fundamentals will likely weather this storm,” says Calanog.

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Spring Rent Growth Blooms

Despite the last two years of decelerating rent growth, the spring season proves its continued strength. After a substantial rent increase in March, which marked the best performance since last summer, multifamily rents in April have once again risen $4 to $1,377, increasing by $10 overall the last two months. Year-over-year, rents have increased by 2.4 percent, but down 20 basis points from March.

The seasonal gain was widespread across major metros, all except for Raleigh. The top growth performers were once again Orlando, which had an increase of 6.2 percent, followed by Sacramento with 5.2 percent, Las Vegas rising 5.1 percent, Tampa (4.4 percent) and Phoenix (4 percent). Warm climates, strong job growth and domestic migration add to the success of these metros, although Sacramento is showing signs of deceleration after years of double-digit growth.

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