Condo Phobia Grips MultiFamily Starts
From MultiFamily Executive, By Les Shaver: In the the single-family for-sale world, a certain level of speculative building practically needs to go on, seeing as how about half of the half-a-million intrepid souls a year who are still buying new homes want one that’s ready to move into.
That’s not the case with multifamily, where development and construction capitalization and business modeling are night and day different than for single family.
The starts that are still starting are ones that got funding well before credit became as rare as three-dollar bills, and before skittish prospective home buyers’ feet went from cold to frozen.
Multifamily Executive senior editor Les Shaver offers this analysis of multifamily housing starts as reported by the National Association of Home Builders.
The National Association of Home Builders (NAHB) reported yesterday that multifamily starts fell nearly 28 percent to a rate of 119,000 units-the lowest number the trade association has ever recorded.
To some, that news was better than expected. “I could have seen it [the decline in starts] being higher than that,” says Greg Bonifield, a principal with Woodfield Investments, based in Ashburn, Va.
Bonifield isn’t alone. In last week’s Multifamily Rental Market Index (MRMI) and Multifamily Condo Market Index (MCMI), which surveys builder confidence, market conditions fell to 22.4 for affordable apartments and 18.6 for market-rate apartments, compared to 45.3 and 40, respectively, at the same time a year ago.
On the condo side, the supply component fell 11 points from the fourth quarter of 2007, to hit a new record low of 7.8. (These quarterly NAHB surveys have a scale of 0 to 100, with a rating of 50 generally meaning positive and negative responses are the same level.)
The vaunted credit squeeze is behind the cliff dive in recent months, but it’s going to take longer than that to sort out normalized supply and demand levels.
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