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There are more multi-family residential properties under construction than at any time since 1974.
890,000 properties with 2+ units are currently being built across the United States. This includes both for-sale product, and for-rent product.
Additional supply is clearly beneficial for both buyers and renters and will hopefully relieve some of the housing affordability issues.
So, why are there so many multi-family units under construction? There seem to be three key reasons.
1. The rental market is especially undersupplied with product and developers see this opportunity.
2. With the increase in residential prices, multi-family becomes the only option for many first-time buyers.
3. Supply chain constraints are causing extended construction timelines.
Construction Openings
It’s not just the availability of materials impacting home builders today, it’s also the availability of labor.
The market could use more inventory. Home builders are trying to catch up.
You’ve likely read the stories about the cost and availability of materials making an impact on home builders’ ability to keep pace with demand.
It turns out they have another factor impacting them as well- labor.
There are more construction job openings than ever before in history.
This is according to a new report from the Bureau of Labor Statistics.
There are 410,000 job openings in the Construction Sector.
A year ago there were 253,000.
If you know of anyone looking for work, there is a good chance a home builder could use the help.
Construction Jobs
When you see people working to build a new home or new commercial building, you may wonder how much money they earn.
Here is some interesting research from the Bureau of Labor Statistics which ranks the highest-paying construction jobs based on median annual income.
Who knew that elevator and escalator installers would be at the top?
- Elevator and Escalator Installer = $88,540
- Boilermaker = $65,360
- Building Inspector = $62,860
- Electrician = $56,900
- Plumber = $56,330
- Ironworker = $53,210
- Sheetmetal Worker = $51,370
- Carpenter = $49,520
- Equipment Operator = $49,100
5.5 Million Short
New home construction is behind by 5.5 million homes over the last 14 years.
Since 2007, new home starts have lagged significantly behind the long-term average.
The Census Bureau started tracking National new home starts in 1958.
Between 1958 and 2007, an average of 1,102,938 new homes were started each year.
Between 2007 and 2020 the average fell to 708,186 which represents a shortfall of 394,752 per year.
That adds up to a total shortfall of 5,526,525.
The under-supply of new homes is of course a significant reason why the market is under-supplied overall.
credit Inman News as the source of this story
The Office
As you travel around the Front Range you will notice the following under construction:
- New Homes
- New Apartments
- New Medical Facilities
However, you will not notice new office buildings under construction.
What gives? I thought we had a booming economy. Why no new office buildings?
There are a couple of reasons. First, construction costs have sky rocketed. In ten years, construction costs have gone from about $200 per square foot to over $300 per square foot.
Rental rates have not increased at the same pace as construction costs so speculative investors can’t make their numbers work.
It’s too expensive to build compared to the rents that can be charged.
One reason why rental rates haven’t increased at high rate is property taxes. Property taxes on Class A office buildings have basically doubled in the last 10 years in many cases.
So, until rental rates catch up with construction costs, we won’t see many new office buildings under construction.
