Significant Drop in Starts and Permits
In October, starts in buildings with five or more units dropped by roughly 15%, to a (seasonally adjusted annual) rate of 266,000 units. Prior to that, the starts rate had increased for two consecutive months from the extremely weak number posted in July. The five-plus starts rate has now been below 270,000 in three of the last four months. To put this in perspective, the last time five-plus production was under 270,000 for an entire calendar year was 1995. Meanwhile, the rate at which new five-plus units permits were issued also declined by 15% in October — down to 294,000.

Source: U.S. Census Bureau; NAHB Economics Group

This is a substantial change in the multifamily landscape compared to early part of 2006, when the five-plus permit issuing rate stayed higher than 400,000 for four consecutive months. The only five-plus construction statistic showing a significant gain in October was the  completion rate, which increased by 18% to 348,000 — the highest one-month number posted since May of 2004. This suggests that apartment builders were focusing their efforts on finishing up projects already unde way, rather than starting new ones. With relatively little in the pipeline, the completion rate is almost certain to decline. The NAHB forecast calls for five-plus production to bottom out around the first quarter of 2007, then gradually improve through the end of 2008. [ return to top ]