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Unfortunately, total employment is still down in 30 states. Even in the states that have been growing, it hasn't been very strong strong. Only five states — Nevada, Montana, Hawaii, Alaska and Kentucky — saw their employment numbers increase by more than 1% from December 2001 to December 2002.
The meeting of multifamily lenders, developers and owners is sponsored by NAHB as well as the Mortgage Bankers Association and the Urban Land Institute.
Multifamily housing is dependent on strong job markets because apartments are often the choice of young, single people with one income, the NAHB economist explained. When jobs are plentiful, these people tend to strike out on their own. But when the market is tight, they move back home or double or even triple-up with roommates.
“Local housing demand depends on local household formation, which depends on job creation,” Duobinis said. “So strong job markets lead to strong housing markets.”
Currently, states with strong construction markets, defense spending and health care and travel industries are likely to have strong housing markets. But those dependent on the airline industry, the stock market, their state governments and manufacturing, particularly technology, are not.
Despite the lack of strong employment growth, or even any growth at all, multifamily starts were up at least 5% last year in 29 states. In 10 of those jurisdictions, moreover, production was up by a third or more.
This year, NAHB expects the apartment sector to expand in 26 states. But with the notable exception of California, Duobinis said, the largest percentage changes will be in small market states.
Starts Have 'Freight-Train' Momentum Despite High Vacancies
In another convention address, meanwhile, David Seiders, NAHB's chief economist, said he was “shocked and awed” by the strength of the multifamily market in the face of flagging fundamentals.
Vacancy rates “are pretty darn high,” Seiders told the meeting. “They're not as high as in the late '80s, but then, that was one heck of a period.”
He also said that the three-month absorption rate for new rental apartments, a measure of how quickly properties with five or more units are renting up, is at an historic low, “another signal that something is amiss.”
Despite all this, the economist said, multifamily developers continue to produce 340,000 units a year.
“It looks like everything is under control,” he said. “This measure has been pretty much flat since 1997. You'd never know from looking at the freight-train momentum of multifamily housing starts that the market balance has deteriorated so badly.”
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