Tuesday, March 17, 2009

Housing Starts: Only 1% Single Family

This just in. NBC analyst Diana Olick notes that inside this morning's numbers, well over 80% of the overall 22% increase in new housing starts are multi-family units; in other words, apartments.

So the number for single-family housing starts of the overall 22% increase is just 1% says Olick.

This is more in line with what we would expect in this economy. Ring around the rosy, we all fall down.

So people who moved out of apartments into new entry-level homes and are now moving out of those homes, they are looking for new apartments and they have already been relocated geographically within any metro area from where their old apartments were to the new production residential areas. This then, according to my analysis, leads to an increase in demand for new apartment complexes in areas that do not have them because those areas heretofore were developed only for single-family entry-level production homes.

Also, many other people who might otherwise be buying entry level homes just cannot afford to do so right now, but still want to be in good areas with good schools, and this too would create additional multi-family demand.

Also, many apartments are owned by very large investment groups that specialize in this class and often own hundreds and hundreds of units in communities across the nation. The successful ones are able to access development funds to meet the new demand.

Also, divorcees account for many multi-family unit occupants. Today a couple's net worth, particularly for younger couples, is not what it was two years ago (or a year ago). With less then to split and start over, many divorcees must turn to apartments but do not want to move far from their existing neighborhoods, jobs, and schools.

Also............ in recent years buyers did not have to put any money down on a new home. In fact, many buyers could finance up to 106% of a home's value and actually walk away from closing with cash in their pocket. This of course was part of the market insanity of that time. However now many people are having to delay a house purchase while they dial back their spending and their debt to save for a down payment - not necessarily a bad thing.

So this makes sense on multiple levels. It is still worth noting however that development of new multi-family units is still creating new construction and new jobs. And for many people, moving into an apartment for a while in order to recharge one's finances before buying a house with a conventional loan is a very good idea. It's what I did, and I'm glad I did it.