Multifamily starts spiked 50% in September to the highest level in three years while single-family starts edged up 1.7%, according to new government figures released Wednesday morning.
Builders broke ground on 227,000 multifamily units in September, up from 148,000 in August on a seasonally adjusted annual basis.
Although the apartment numbers look impressive, National Association of Home Builders chief economist David Crowe cautioned that multifamily numbers tend to bounce around much more than the single-family readings.
MF starts are "not exploding," he warned. Going forward, he expects to see rental production rise at a nice pace because there is such strong demand for apartments.
The multifamily sector has been a hot niche of late. The Federal Housing Administration, for instance, endorsed 1,150 MF loans with a combined UPB of $12 billion in fiscal year 2011. It was the third record fiscal year for FHA in terms of MF loan production.
Fannie Mae and Freddie Mac do not finance new MF construction loans and FHA filled that void when the banks exited that market. "Banks are starting to re-enter that market," FHA acting commissioner Carol Galante told National Mortgage News recently. She expects FHA's share of the new construction market to begin shrinking soon.
Meanwhile, single-family housing starts rose 1.7% in September after a 2.7% decline in August.
The Census Bureau reported Wednesday morning that single-family housing starts rose to a 425,000 seasonally adjusted annual rate in September from a 418,000 rate in August.
Overall, single-family starts are down 5% from a year ago.
However, builders are noticing renewed buyer interest in markets with few foreclosures. And some builders have shifted their assessment of market conditions from "poor" to "fair," according to a NAHB/Wells Fargo survey.
"Builder confidence regained some ground in October due to modest improvements in buyer interest in select markets where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.
The NAHB chief economist noted that single-family starts leveled off in the second and third quarters.
"We are expecting single-family construction will be riding a plateau for a while," Crowe told NMN.
But he sees some increase in starts toward the tail end of this year that will continue into next year. He is forecasting that SF starts will total 500,000 in 2012, up 17% from this year.
