Starts Keep Climbing
In March, the seasonally adjusted annual starts rate for units in buildings with at least five apartments rose to 329,000.   Although this is almost identical to the starts rate for March of 2002, it represents a 9% increase from February 2003.  The multifamily starts rate is notoriously volatile, and it's inadvisable to read too much into a one-month change, but we've seen numbers in the 300,000-330,000 range consistently for several months now.  So far for 2003, multifamily production is running slightly ahead of its pace during 2002. 

This continued strength may seem puzzling in the face of ever-softening demand measures [link to Rose's article].  Among possible reasons are the availability of inexpensive capital, weak returns on investments in other assets, and expectations of improved demand in the not-too-distant future.  Another contributing factor is the incentive to produce below-market-rate rental units provided by the Low Income Housing Tax Credit and tax-exempt bond financing.  The caps on both these programs have been relaxed recently. [ return to top ]