Multi-Family Housing 2016

The multifamily sector has been sizzling in recent years, with rental demand skyrocketing after the recession. "It has really led the residential construction industry in the recovery," Dietz said. He pointed to "the sheer number of millennials" as the driving factors behind the market's success. 

However, experts predicted that the extreme growth in multifamily will soon start to level off. Dietz forecast a 4% dip in multifamily starts this year and only a 6% gain in 2017. This slowdown will likely result from millennials making the switch from renting to owning, as well as older buyers recovering from the effects of the recession and re-entering the housing market, according to Dietz.

 

Despite the positive predictions for the industry, economists emphasized the obstacles that continue to hinder new construction. Dietz referred to the three major issues as the "3 Ls": labor, lots and lending. These concerns have contributed to the lack of a consistent upward trend in the NAHB/Wells Fargo Housing Market Index, a pattern that reveals builders are still "cautiously optimistic" about the market, according to the NAHB.

Labor shortages have plagued both residential and nonresidential construction for years, and contractors have indicated the situation likely won't ease anytime soon. "Labor was the top business challenge in 2015, and it's expected to be the top business challenge in 2016," Dietz said. "Employment in the industry could be growing faster given the existing demand for housing and stagnant existing home inventory levels, and we can’t grow faster due to this labor challenge."

Lot availability and lending constraints are connected, as builders have reported difficulties securing acquisition, development and construction loans and finding available lots, according to Dietz. "In some ways, I think (lots) will come to challenge labor as the top business challenge," he said. "We've got modest levels of production but high rates of builders saying lot supplies are a challenge."

 

back to top