Starts Have Some Catching Up to Do

In July, starts in buildings with five or more apartments dropped to a (seasonally adjusted annual) rate of 80,000. This is down 16% from the June figure (which itself was just revised downward), and down a massive 72% on a year-over-year basis. The rate of 80,000 posted in July ties April of this year for the lowest number on record.

In fact, since the Census Bureau began reporting a separate five-plus starts rate in 1963, the series has only dipped below 100,000 five times—three of which were recorded in the last four months (the other two occurred during what had previously been the worst recession for multifamily production on record, from 1991 through 1993). Meanwhile, the rate at which new five-plus permits were issued fell to a seasonally adjusted 84,000 in July. This is down 26% from June, 73% from July of 2008, and represents the lowest monthly rate on record.

NAHB's short-term forecast (which has just been extended through 2011) shows a recovery in multifamily production, but not one that becomes substantial until 2011. The forecast calls for the five-plus starts rate to climb above 100,000 in the third quarter of 2010, and to continue increasing steadily thereafter. Even so, the five-plus starts forecast remains well below 200,000 by the end of 2011. For comparison, more than 290,000 five-plus units were started each year during the decade from 1997 through 2006.