Multifamily Report: Apartment construction keeps the multifamily market steady

Despite the collapse of the condo market, multifamily construction is down only about 5% in the last six months, thanks to a burst of apartment construction.

Condos, like single-family homes, suffered a sales decline caused by tighter mortgage underwriting standards at the bottom of the market and a withdrawal of speculative buyers at the top of the market. As a result, some projects designed as condos will be opened as apartments, and some buildings previously converted to condos will be converted back to apartments. Trends vary widely by region.

There is a huge surplus of entry-level condos in the hot growth metro areas of 2004-06, and a surplus of high-end condos in resort metro areas, especially in Florida.

Multifamily construction spending growth will be about 4-5% after inflation through 2007, and then steady at the 2007 level through next year.