Gennady T. Menaker’s Post

U.S. multifamily housing is experiencing a significant pullback in new construction, even as the number of units that began construction in the past two years is expected to reach a 40-year high. While 675,000 units were added this year, construction starts on rental apartments, after peaking in the first quarter of 2022 at 211,000 units, have since plummeted 70% to just 65,000 units starting construction in the third quarter, reflecting a dramatic shift in market dynamics. https://lnkd.in/gk4yDZ2a

While the multifamily market digests the record-high completions of 2023 and 2024, a dramatic slowdown in the construction of new units has major implications for apartments projected to become available in the next two years. According to market participants, many equity capital sources for new development are remaining on the sideline over concerns that the investment returns between existing apartment project purchases and new ground-up development aren’t wide enough to justify the development risk. This has resulted in a further decline in the construction of new apartments this year. In the first quarter of 2024, starts declined 63% over the past 12 months to 67,000 and fell even further in the second quarter to 58,000 units, the lowest quarterly total since 2011. https://lnkd.in/gf65xieq

🏠 Multifamily Construction Faces Major Slowdown 📉 New multifamily housing starts have plummeted by a staggering 52%, driven by high costs and severe labor shortages. Rising interest rates are adding fuel to the fire, making it tough for developers to kick off new projects. Read more 👉https://bit.ly/3LcBqsB Prefab can be a game-changer, helping to streamline timelines, cut costs, and alleviate labor pressures. #PrefabConstruction #MultifamilyHousing #ConstructionInnovation #Efficiency #CostSavings

Check out this insightful article from Chandan Economics at Arbor on 'The Evolving Characteristics of Multifamily Construction.' It dives into the latest trends and innovations shaping the future of multifamily living. Perfect read for anyone in the real estate space! #MultifamilyConstruction #IndustryInsights #Construction #Multifamily #Heritageccs https://lnkd.in/gdKzPAqz.

First Quarter Multifamily Missing Middle Construction The missing middle construction sector includes development of medium-density housing, such as townhouses, duplexes and other small multifamily properties. The multifamily segment of the missing middle (apartments in 2- to 4-unit properties) has disappointed since the Great Recession. For the first quarter of 2023, there were just 43,000 2- to 4-unit housing unit construction starts. This is down 25% from a year prior. As a share of all multifamily production, 2- to 4-unit development was just above 6% of the total for the first quarter. In contrast, from 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction. Construction of the missing middle has clearly lagged during the post-Great Recession period and will continue to do so without zoning reform focused on light-touch density.

Multifamily construction across the U.S. and Houston has sharply declined due to high borrowing and construction costs, but the Heights neighborhood in Houston is an exception. In 2023, the Heights saw a four-year high in construction starts, with nearly 2,000 new units expected between 2024 and 2025. The Heights, known for its historic Victorian homes, has seen significant demographic improvements and rising property values. The area has become increasingly attractive due to the renovation of historic homes, new upscale developments, and enhanced retail along major streets. In the short term, the influx of new construction is likely to increase the vacancy rate, which stood at 8.5% in the second quarter, and put pressure on rent growth, which has been negative since mid-2023. However, the Heights' central location near Downtown and Uptown, along with its growing retail and culinary scenes, suggests a positive long-term outlook for investors and renters.

Tight multifamily fundamentals in Milwaukee and Madison aren't positioned to let up any time soon. The two metros stand as some of the highest-occupancy markets in the country and demand for new supply relative to the pace of new supply additions has been among the strongest nationwide. In fact, Madison ranks as the top market in the country for what I would call a severe supply-demand imbalance. Across the country, it would take an estimated 2.9 years on average for renters to absorb new and under-construction inventory if nothing else were to break ground today. In Madison, that figure falls to just 1.3 years, with Milwaukee also outperforming the average at 2.7. Construction activity has fallen in Milwaukee and Madison by roughly 35% and 50% from peak levels two years ago, and based on the recent velocity of construction starts, this figure is set to fall further in the coming quarters. With recent rate cuts, we could see some relief on the borrowing side that could help put more shovels in the ground early next year, but there really needs to be a concerted effort across state, county, and local governments to dig us out of these holes. And this isn't just true in Milwaukee and Madison. There's a statewide housing shortage. As announced by Lafayette Crump at the BizTimes Media Commercial Real Estate and Development Conference a couple of weeks ago, I applaud the City of Milwaukee for pursuing the development of a program that would help fund the development of housing at 60-100% of AMI. In conversations I have with developers across the state, it's clear that new tools are needed to help facilitate development across a variety of housing types and price points. There is no one-size-fits-all solution, and we don't know yet what it'll look like, but this program could be a great step toward progress and addressing prohibitive funding gaps that have seen many developers to go pencils down in a segment that sorely needs it. Thoughts? Questions? Seeing something else in the market? Drop a comment 👇

Over the past five years, the national multifamily housing market added a massive amount of new supply, with total completions surging from 1.3 million to 1.8 million units. This 500,000-unit increase is 37% more than the number of rental units added in the previous five-year period. However, the pace and distribution of this supply growth varied markedly by region, with the Sun Belt dominating the expansion. https://lnkd.in/g_Dh7hmF

City of Milwaukee and City of Madison, WI metro housing markets are among the highest-occupancy with demand for new supply relative to the pace of new supply additions has been among the strongest in the county. Wisconsin communities continue to be highly desirable places to live and invest. League of Wisconsin Municipalities American Planning Association - Wisconsin Chapter Urban Land Institute

Annual Building Permit Trends for Multifamily Housing Units Contact me to discuss the latest scoop in real estate! #TidewaterRealEstate #MurrayRealtyGroup #HamptonRoadsRealEstate #virginia #virginiahousing #virginiarealtor #virginiarealestate #virginiahomebuying #realestate #realtor