Do the latest multifamily trends signal the end of an era?
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Market watchers are starting to see the contours of the recent decline in multifamily housing construction come into relief. In Salt Lake City, the end of a ten-year expansion may be upon us.
RealPage, a leading real estate data firm, titled their most recent trends story “Multifamily Permitting Appears to Have Peaked for This Cycle” – a less-than-definitive statement but one that suggests that a reset rather than continuity lies ahead.
Doomsayers point to high costs in the finance market and the construction industry, as well as geo-political insecurity. If all of these ratchet up permanently, the end of the boom does seem inevitable.
Yet it’s been only a year since multifamily permitting hit its all-time high in 2022. Could “correction” or “adjustment” be better ways to describe the trends we’re currently experiencing?
Let’s look at some recent numbers for housing activity at the national, regional, and local levels to see what they may be telling us.
National multi-family picture
Chuck Ehmann for RealPage Analytics notes that multifamily permitting hit an all-time high in 2002, peaking at ~700,000 units.
The decline came soon thereafter. By April 2023, the annualized rate of multifamily permitting was 502,000 units, a decline of 9.7% from March 2023 and 23% from last April.
The post-pandemic uptick since 2021 had brought 590,000 units annually, well above the performance output from 2015 to 2020, which averaged 440,000 units per year.
Completions of multi-family projects in April 2023 were down 17.4% from March, but were up for the year ending in April 24.2%. A sign of the end of cycle?
Regional picture
Multifamily construction starts were down across all four regions, most dramatically in the Northeast (48.2%) and the Midwest (47.4%). The slowdown in the South was less sharp, at 15.7%, while the West region saw a yearly dip of only 10.1%
Metros and cities
The RealPage report offers aggregate numbers for permitting in urban metro areas as well as cities.
The metro areas at the top are New York – White Plains (30,812); Houston – the Woodlands – Sugarland (27,579); Dallas – Plano – Irving (23,424); and Phoenix – Mesa – Scottsdale (20,841). The other Metros that fill out the top ten are Atlanta – Sandy Springs – Roswell; Austin – Round Rock; Washington – Arlington – Alexandria; Los Angeles – Long Beach – Glendale; Tampa – St. Pete – Clearwater; and Raleigh/Durham.
Yet those rankings are chastened by the annual decline in permitting numbers.
That list is topped by Philadelphia (-16,696); New York – White Plains (-7,792); and Austin – Round Rock (-4,650).
Salt Lake City made the “significant slowing” list, with 2,777 fewer units permitted over the year ending in April.
The hottest cities (inside the metro areas) multifamily top 10 for the last year are: Austin (13,349), Los Angeles (11,462), Houston (10,714), Phoenix (10,482), unincorporated Harris County (Houston) (10,445), Atlanta (10,345), Dallas (8,715), Brooklyn (8,344), San Antonio (8,173), and unincorporated Hillsborough County (Tampa) (7,171).
Salt Lake City Planning Division activity
The monthly report from Salt Lake City’s Planning Division also tells a story of slowdown, and perhaps the end of an era.
Since 2013 the city has seen a steady increase in the number of applications submitted to Planning. That looks to end in 2023.
April’s numbers show a 18% decrease from April 2022, counting activity across the Historic Landmarks Commission, Planning Commission, the Zoning Administrator, as well as Subdivisions of parcels and new platting. April 2021 was its busiest April ever. 2023’s applications were 14% lower than the 10-year average for the cruelest month.
While the shift in tides continues into April’s numbers, what remains ahead is obscured. How long will the doldrums last, and are we seeing a dead end, or just a detour?
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