Due to Residential Homes Sales Correcting - Builders Look to Growing Multifamily Market

With the residential single-family home market correcting itself and affordability for most prospective buyers on the decline, real estate consumers are putting their dreams of homeownership or a vacation home on hold, prompting the demand for rental property to rise. For builders, rising occupancy rates and monthly rents, and increased traffic at all classes of rental apartments are all signals that multifamily is hot and will be for some time to come.

This news comes on the heels of a recent announcement from the National Association of Home Builders' (NAHB) that its Multifamily Stock Index (MFSI) is at its highest reading of all time. NAHB's Multifamily Stock Index tracks the total returns (including capital gains and dividends) of 24 publicly traded firms principally involved in the ownership and management of apartments. During the month of August, the MFSI reached 3,328, its highest reading of all time, and almost 30 percent higher than it was a year ago. In comparison, the S&P 500 index with dividends reinvested gained 2.40 percent in August and is about 9 percent higher now than it was a year ago.

Recognizing a possible trend toward multifamily construction, government agencies and lenders are getting together to make it easier for developers to secure loans. The California Housing Finance Agency (CalHFA) announced recently it has reduced interest rates for developers of multifamily housing. CalHFA, which earlier this year introduced new programs to encourage the construction or rehabilitation of multifamily housing, reduced the interest rate on 30-year loans for multifamily projects from 5.80 percent to 5.55 percent.

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