There are currently around 250,000 apartments being built annually, but the National Multi Housing Council thinks these numbers could rise substantially. It is anticipating that this demand will rise to at least 300,000 new apartments annually, and will possibly reach as high as 400,000.
This view is in stark contrast to other analysts who feel the current rate of building is about right. Mark Obrinsky, vice president of research and chief economist for the National Multi Housing Council is anticipating the demand for apartments will soon recover to be as strong as it was before 2008. However this is dependent on the US successfully passing the fiscal cliff issue. At the moment there is the possibility that the US economy could sink back into recession this year, something that would definitely limit growth within the multifamily construction sector.
In spite of this, the demographics do seem to indicate that the demand for apartments will continue to grow. During the next five years the number of 20 to 34-year-olds will grow by 2.4 million, the fastest growth rates since the early 1980s. This is the age group most likely to rent apartments. In addition, rising immigration numbers could also increase demand. In November the permit rates for multifamily housing increased to 296,000, double the amount just after the recession and this growth is anticipated to continue.
Terry Robinson, president of the Off Market Association and Genesis the Capital said “Apartment construction and financing has definitely been picking up steam as far as we can tell at the Off Market Association. Better financing options and investors who are looking for stable returns have given impetus to the market and barring a fall off the fiscal cliff, we expect this to continue to increase during 2013.”
Before the recession, the construction of multifamily units regularly surpassed 300,000 annually, but if this figure is to increase to 400,000 then the economy will have to strengthen substantially. This would mean the creation of new households which has been at its weakest level during the last decade. If new household formation were to return to an annual 1.2% percentage rate, then this would almost certainly increase demand for apartments.