Bumpy Ride Continues
Multifamily starts rise in May after a tough April.
The roller coaster ride continues. After a dramatic decline in the starts pace in April, the total jumped 25 percent in May to a seasonally adjusted annual rate of 321,000 apartments, according to the U.S. Census Bureau. These figures are on par with March’s numbers and put starts on pace to reach NAHB’s projection of just fewer than 300,000 multifamily units in 2006.
Analysts don’t seem to be very concerned with month-to-month variances. “We are more interested in year-over-year changes or quarter-over-quarter changes than changes from month to month,” says Craig Leupold, a principal with Green Street Advisors, a San Diego-based independent research and consulting firm concentrating on publicly traded real estate securities.
Still, Michael Carliner, staff vice president for economics for the NAHB, is a bit surprised production is staying the course. “A lot of multifamily condo production is going on, even though the wisdom of that is becoming clearly questionable,” he says. “On the other hand, the rental market looks like it’s getting better all the time.”
Still Carliner isn’t sure increased starts from apartments will be enough to compensate for the eventual deceleration in condo starts. “We do expect to see some slowdown overall,” he says. “The slowdown in condos will not be fully offset by the rentals. The decline in multifamily starts will be less than the decline in single-family starts. We will also have some additional tax credits that will boost [the multifamily market] as well.” –Les Shaver
So Long, SOMA?
HUD considers dropping quarterly apartment survey.
Multifamily firms and researchers could soon lose a source of national information for the apartment market. Because of budget pressures, HUD is considering dropping its Survey of Market Absorption (SOMA), a quarterly report that measures how quickly new apartments are rented.
Doing this survey costs HUD approximately $800,000 yearly, according to a HUD spokesman.
The proposal to discontinue this apartment survey has NAHB concerned. “We use [the survey data] quite frequently to judge what is going to happen in the multifamily market,” says David Crowe, senior staff vice president, regulatory and housing policy. The survey also collects information on condominiums and apartment characteristics.
While multifamily research firms also collect similar data for the industry, there are several important distinctions between their information and the government’s. “This is a generic piece of information available at no extra cost. It’s also consistent across the country,” Crowe says. “I call what the government does the ‘data infrastructure.’ Obviously the government can’t provide every piece of data that a business might need, but it provides the background.”
If HUD does stop funding SOMA, the last data collected would be for apartment completions in 2006’s fourth quarter.
–Alison Rice