Developers are ramping up apartment construction across the country to cash in on rising rents. Multifamily construction is at nearly two-thirds of its pre-recession peak; single-family home construction is about a third of its way back, David Crowe, chief economist at the National Association of Home Builders, told The New York Times.
The multifamily construction boom is strongest in the South and West, where employment is picking up, and it’s being driven by young people who are delaying home ownership.
“People in their early 30s, the age when many might look to buy a first home, are renting for longer periods of time, partly because mortgages are difficult to come by and partly because they have been unnerved by the turmoil in the housing market,” The New York Times reports.
Meanwhile, developers are rushing to meet the demand. Markets like Houston, Denver, Phoenix, Oakland, Seattle, Miami, and Charlotte, N.C., are seeing increases in rental demand, according to housing surveys.
“The demand for building is all over the country, really,” says Ric Campo, chairman and chief executive of Camden City Centre, a development of thousands of apartments in the Houston area. “We’re seeing higher rents, faster lease-ups, lower construction costs — everything you want to see. Part of it is there’s just a pent-up demand for new product because we didn’t build anything during the downturn.”
Residential rents increased 4.2 percent in 2011 on a national basis, and 3.6 percent so far this year, according to Axiometrics, an apartment market research firm.
Some in the sector now fear overbuilding, particularly with the surges in rent increases now starting to taper off.
“The real test is going to be what happens between now and April or May as we see all these new units introduced to the market,” says Jay Denton, Axiometrics vice president for research.