| A stunning drop in apartment construction signals that today’s financing environment is forcing multifamily developers to hit the brakes. – Article via CRE Daily <— |
| By the numbers: U.S. housing starts fell 15.4% in May to a seasonally adjusted annual rate of 1.18M, driven by a 41.6% plunge in multifamily starts from 486,000 to 284,000 units. Single-family starts slipped by just 1.9%, suggesting a slower housing market rather than a collapse. |
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| Financing math breaks: Higher rates, rising construction costs, and affordability challenges are squeezing apartment projects. Spacial CEO Maor Greenberg said multifamily developments are especially vulnerable because higher borrowing costs and uncertainty make many deals no longer pencil. |
| A word of caution: The Census Bureau cautioned that housing starts are volatile and month-to-month swings can be misleading. Economists at Oxford Economics and Pantheon said May’s weakness was largely a multifamily story, though elevated mortgage rates continue to weigh on a broader housing recovery. |
| Stuck in neutral: Building permits, a key gauge of future activity, suggest construction has plateaued rather than collapsed. Total permits dipped 0.7% in May, while single-family permits rose 0.6%, signaling developers are holding steady—not ramping up or pulling back dramatically. |
| Pipeline keeps shrinking: The construction pipeline continues to thin. Housing completions fell 8.1% in May and 14.2% year over year, limiting new supply. With the U.S. still short on housing, fewer deliveries could help support apartment rents and home prices. |
| ➥ THE TAKEAWAY |
| May’s housing data tells two stories: Multifamily development is under pressure, while the broader housing market is simply slowing. For CRE investors, fewer apartment projects could mean tighter supply and stronger fundamentals over the next two years. |
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