Dive Brief
- Home for buildings with five or more units decreased by 37.9% year-on-year at a seasonally adjusted rate of 314,000 in January, according to a report by HUD and the US Census Bureau.
- Developers withdrew permits for 405,000 apartments in buildings of five units or more in January, a 26.6% year-over-year drop. At the end of January, 979,000 units were under construction, up 5% year-on-year.
- Overall, housing starts reached nearly 1.3 million in January, a 0.7% year-over-year increase. Single-family builders were authorized for 1 million units, a jump of 22.0%. Housing licenses reached almost 1.5 million, up 8.6% year-on-year.
Diving knowledge:
Housing starts continue to rise, reaching nearly 1.4 million in January, up 2.8% year-on-year. Apartment developers completed 538,000 units during the month, a 53.7% year-over-year jump.
These new units are putting pressure on multifamily owners across the country, but specifically in Sun Belt markets. In the UDR portfolio of Highlands Ranch, Colorado, Austin, Texas; Nashville, Tennessee; Orlando, Florida; and Denver will see some of the highest levels of new supply.
“The Sun Belt is forecast to face significantly higher absolute deliveries than coastal markets, although all regions will face higher relative supply in 2024 compared to their long-term averages,” he said. UDR Senior Vice President of Operations Mike Lacy said of the REIT. Announcement of results for the fourth quarter of 2023.
However, these deliveries will eventually slow down. “I think when you turn the corner and get into the 25th, you’re going to start seeing the number of supplies slow down,” Michael Manelis, chief operating officer of Chicago-based Equity Residential, told the REIT Fourth Quarter Results Call. “But you’ll still have some pressure from the units that were delivered to the market in 2024.”
Still, the new supply isn’t all bad news for multifamily homeowners. Those apartment completions could also provide buying opportunities for REITs like EQR and Arlington, Va.-based AvalonBay Communities looking to expand in the Sun Belt.
“As we head into 2023, the transaction markets remain unresolved, but we see stronger than usual supply in the Sun Belt and Denver markets, where we want to expand, hoping to create buying opportunities for us at the end of the year,” said EQR’s CEO. Mark Parrell said on the earnings call.
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