The first quarter of 2024 may have seemed like a bit of a rollercoaster ride for the home-building industry. According to an April 2024 report from the National Association of Homebuilders (NAHB), while year-over-year (y/y) comparisons showed an increase in the pace of completions of multifamily units entering the marketplace at 27.4%, starts for apartment buildings with five or more units showed a significant decline of 43.7%.
Developers completed a significant number—502,000—of apartment units in March. However, 433,000 permits were pulled, a 20.8% y/y decrease. By the end of March, 940,000 units were under construction—a 1.6% decrease.
The numbers left some in the industry disappointed.
According to Danushka Nanayakkara-Skillington, NAHB’s assistant vice president of forecasting and analysis, “Housing starts fell in March with interest rates somewhat higher than expected last month as the latest inflation readings failed to show improvement. Builders are also still facing higher supply-side costs and tighter lending conditions,” she said.
And with interest rates remaining high, costs don’t appear to be moving in a favorable direction.
“I will tell you that we won’t see the significant reduction that everybody is waiting for,” said Marc Padgett, president of Summit Contracting Group, which specializes in multifamily construction.
Due to its outsized influence on banking, contracting and construction, real estate and any number of other businesses, housing is a key indicator of the economy. Housing starts gauge consumer sentiments and builders’ willingness to take on new projects or complete existing ones. Trends in market paths are traditionally hard to predict. What is seemingly trending down in one quarter may be up in the next. The numbers will bear watching through the upcoming months.