Thursday, May 19, 2011

Multifamily permits hit 3-year high in March

Year-to-date in Colorado, building permits issued for multi-family construction are up 2.4 percent, year over year, while permits issued for single-family construction is down 28 percent for the same period.

This year, through March, there have been 680 multi-family permits issued in Colorado, and 1723 single-family permits issued. For the same period during 2010, there were 664 multi-family permits issued, and 2,395 single-family permits.

For the month of March alone, single-family permits are down, year-over-year, by 24.6 percent, but multi-family permits are up 10.5 percent. There were 735 single-family permits and 493 multi-family permits issued during March 2011.

The second graph shows that overall, both multi-family and single-family permits in March are at levels below what was typical over the past decade. However, the March total for multi-family permits was the second-highest total in 28 months. Compared to March 2011 only September 2010, during which 561 permits were issued, had more permits issued in the period since October 2008.

New construction of single-family homes has shown few indications of renewed growth in recent months. Recent housing starts data from the Census Bureau showed only 7,000 new homes sold in the entire western United States during March.

Multi-family activity, on the other hand, has shown some small indications of renewed growth. There has been much optimism within the multifamily industry about rent growth which in turn will lead to new construction. In spite of the optimism, however, few new construction projects have actually begun, although the March permit total for multi-family is one of the highest March totals in the past decade.

The third graph shows that with the exception of March 2006, the number of permits in March exceeds the March permit total of every other year since 2003.

While multifamily permits are at a 3-year high, year-to-date totals are nonetheless at low levels by historical standards. In previous posts, we have discussed the repercussions of such a small amount of new construction in multi-family housing. Since permits are a helpful indicator of future construction, it stands to reason that new construction will continue to be at historic lows for the short term, which will in turn drive up rents and keep vacancy rates low.