Apartment

Strong apartment construction as house prices soar

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Now is not the right time to build single-family homes. So said Monday morning’s release of the National Association of Home Builders’ Housing Market Index, which for the eighth straight month saw a decline in builder confidence, blaming interest rates. interest and high construction costs.

But single-family is only part of the housing market – apartment buildings are booming. It is estimated that more than 800,000 apartments will be under construction this year, a 40-year high.

Part of the reason developers are still building apartments?

Well, there’s a glut of renters who would be landlords if a down payment in 2022 didn’t require a winning Powerball ticket.

“There are a large number of households that are in need of housing, staying longer or looking for the rental housing market,” said Rob Dietz, chief economist for the National Association of Home Builders.

This backlog of tenants means higher demand, higher rents and higher returns on investment in new apartment projects.

And those projects are mostly located in places where everyone seemed to be moving during the height of the pandemic, said Caitlin Sugrue Walter of the National Multifamily Housing Council.

“So Texas has a lot of new construction, other parts of the southeast as well,” she said.

Think suburban Dallas and Atlanta, less downtown San Francisco.

But putting these apartments on the market is not so easy. It takes forever to find the labor and materials to complete them.

“Supply chain issues as well as rising input costs in multi-family housing are causing multi-family buildings to be under construction for a longer period of time,” said Emily Hamilton. She researches housing at the Mercatus Center at George Mason University.

The longer and more expensive the construction of apartments, the higher the monthly rent.

Nationwide, rents are up 12% from 2021, according to Apartment List.

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