Is the multifamily sector overbuilt? A rental vacancy rate of 9.6% typically would cause an abrupt decline in multifamily construction spending, but not these days. Spending is expected to fall only slowly in the last three quarters of 2003 and then make up the decline by the end of next year. The condo market is steady, parallel to the single-family market. The current high rental vacancy rate is due to the loss of households to single-family homes with cheap mortgages and the slow start to the business recovery that postponed job and household expansion. These restraints are now relaxing.
Mortgage rates are expected to remain steady to slightly higher and job losses are subsiding with a turn to rising employment expected this summer.
Atlanta, last year's top market for permits in five-plus unit buildings, has had nearly a 50% fall in permits through May compared to the same period last year. Chicago, Denver, Miami, Minneapolis, and Orlando have also had 30-50% drops.
Los Angeles is the top market this year, with permits up 134% to 9,426. Year-to-date permits in five-plus unit buildings also have nearly doubled in Houston, Philadelphia, Raleigh, San Diego, San Francisco, and Tampa.