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Explaining Growth in Multi-Family Home Builds

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Explaining the Growth in Multi-Family Home Builds

Why Are Multi-Family Home Builds Increasing Around the Country?

According to the National Association of Home Builders (NAHB), multifamily housing starts around the country increased by 2.1% in July 2016 to a seasonally adjusted annual rate of 1.21 million units.

It’s great news for builders who specialize in these types of projects, but what is the cause behind this increase? Keep reading to learn more.

Demand for Rentals is Driving the Need for Multi-Family Housing

Ed Brady is the Chairman of the NAHB, and he explains this increase by simply stating, “New household formations are upping the demand for rental housing, which in turn is spurring the growth of multifamily production.”

Simply put, demand for rentals is high in many areas throughout the country. This can happen for a number of reasons, including:

  • Job growth, like when a large employer builds offices in a new location.
  • Migration, which can occur due to employment prospects as people move in hopes of securing a better job.
  • Household formation also plays a role. For example, many millennials opt to live with roommates rather than purchase a home.
  • Elevated home prices in places like San Francisco, Denver and other hot markets cause people to rent instead of buying.
  • Lifestyle preferences can keep people in dense urban areas where multi-family housing is more readily available.

Will Demand for Multi-Family Housing Always be High?

Before you rush out to plan several multi-family projects, it’s important to learn more about the trends and cycles we’re seeing in the current housing market.

Single-family home starts are also rising, and when these two trends are explored together, they’re quite consistent with NAHB’s housing forecast. NAHB predicts that single-family construction projects will continue to rise and multi family builds will eventually level off as the market finds equilibrium in supply and demand.

Of course, no one knows exactly when that equilibrium will be realized. Some insiders anticipate that the rental market will level off, especially in the aforementioned cities like San Francisco and Denver. This can happen when “explosive job growth” begins to slow down.

Each of these different factors demonstrate why it’s important to stay up to date about market conditions and demands. If you want to learn more about the housing market as it pertains to builders, the NAHB is an excellent resource with plenty of information to keep you educated.

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