Housing starts dropped in the past few months as both single-family home construction and mulifamily apartment buildings slowed down. Nevertheless, the number of housing units under construction rose to 1.7 million units for the first time ever. While construction delays and supply constraints have lengthened the under-construction time, the record high number of units under construction is also attributable to the rise of the apartment buildings. Data shows that there are more multifamily than single-family units under construction. Specifically, this past fall there were 893,000 units in buildings with five units or more compared to 800,000 single-family units that were under construction. Meanwhile, it’s worth noting that the number of single-family units under construction has decreased over the 3rd quarter of this year. On the other hand, the number of multifamily units under construction has increased the last couple of years. Thus, the completion of these units could help with rent increases.
In addition, even more apartment buildings have begun construction. Although multifamily housing starts eased in the Fall, the U.S. is building about 50% more than the pre-pandemic historical average. Nevertheless, our country continues to underbuild single-family homes. Yet the number of single-family housing starts is 13% below the pre-pandemic historical average. Thus, multifamily construction has made impressive gains during the last couple of years. While people are buying homes faster that they can be built, builders are turning to structures that can accommodate more people under one roof.
The supply of multifamily units is still not keeping up with demand, so rent prices will continue to rise quickly. With mortgage rate near 7%, increasing the home borrowing on a monthly basis is about $1,000 higher than a year ago. So, current buyers need to earn $40,000 more to afford to buy the median-priced home compared to a year earlier. As a result, about 15% fewer renters can afford to purchase a median priced home compared to a year ago. This could cause people to rent for longer, boosting the demand for rental homes.
Finally, although multifamily units are the new trend, single-family homes remain the most common home type for recent buyers at 82%, followed by townhomes or row houses at 7%. If you are looking for more information on this up and coming market, contact Falvey Real Estate Group at 518 452-3912.