By Brian Johnson
Santa Barbara Association of Realtors
For the first time since 2013, the number of single-family homes under construction was higher than that of the number of units of multifamily construction. That is according to a blog post from Robert Dietz, the National Association of Home Builders Chief Economist. As Dietz noted in his article, up until 2008 that was the norm. Then the financial crisis that led to the Great Recession hit and homeowners moved to rentals in droves. Is this the beginning of a new trend? Not so fast according to Dietz and others.
It is important to remember that the pandemic last year saw a slowdown in the construction of new multifamily units, as people were not moving from apartments to other apartments. They started looking to buy homes and this pushed builders to add more supply to the pipeline. Renters began looking for more space and more privacy with the ability to work from home. They did not just need a home office but they were looking for home classrooms for the children too.
Once the initial wave of hunkering down subsided, there was a rush in the market for buying homes. Prices increased across the country by an average of 13% since last year with some markets increasing by as much as 30%. These price increases have pushed many markets into having a majority of residents being renters. This also led a number of large investors and developers to get into the “Build to Rent” game where they were building single-family housing but specifically to rent vs sell.
Will these numbers hold up? It is unlikely. The number of multifamily housing starts is up 17% from 2020 so we are already seeing the multifamily market start to come back. Additionally, not a lot of metro areas can support a large amount of single-family housing construction. Finally, the lack of a good supply of starter homes for millennials and the fact that multifamily units can be more cost efficient for construction and renting will contribute to the multifamily market retaking the lead.
Brian Johnson is a California licensed real estate agent and the Managing Director of Radius Commercial Real Estate. Brian handles all types of commercial real estate transactions but has a special focus on multifamily investments. He can be reached at 805-879-9631 or firstname.lastname@example.org