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Dive brief:
- October starts of buildings with five or more units fell 25.9% from September and 10.8% year over year to a seasonally adjusted rate of 347,000 apartments, according to the monthly. HUD and US Census Bureau report premiered on Friday.
- As multifamily numbers eased, housing starts fell to the lowest level in October since 2020. Overall, they came in at 1.2 million, down 4.6% from September’s revised estimate of 1.3 million and down 7.8% from October 2024’s 1.4 million.
- At the end of October, 699,000 units were under construction, down 13.1% year-over-year and up 0.3% month-over-month. In a sign that new supply is slowing, multifamily developers finished about 367,000 annualized apartments in buildings with five or more units, a 41.9% year-over-year drop and an 8.9% month-over-month decline.
Diving knowledge:
Apartment developers pulled permits for a seasonally adjusted rate of 481,000 apartments in buildings of five units or more in October. This was a 17.9% year-on-year increase and a 0.4% increase from September.
For many developers, stubbornly high new inventory and a tight stock market have made it difficult to build new properties, even when they are permitted.
“Building equity is the issue,” Reece Kimsey, partner and head of site acquisitions at Still active developer Middleburg Communitiessaid Multifamily Dive. “You can get capital, but it might not be what you’re used to getting.”
Much of the available capital is preferred capital, which has a high cost, according to Kimsey.
“They know we need that last check to get over the finish line,” Kimsey said. “So they’ll hit you on the terms.”
If a developer doesn’t have a tight deadline to start a project, the best approach is to wait and see if construction costs continue to fall and capital conditions improve.
“We’ll wait a few more months if we need to and see if that [equity terms] change,” Kimsey said.
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