The NAHB is out this morning with a chart that gives some perspective on apartment building investment starts. The Census Bureau reported 285,000 unit starts in October for 5+ unit buildings. At that rate it looks like we’re just returning to what was a sustainable level of starts in the ’97-’06 period.
While developers tend to overshoot the sustainable level (which is where the apartment building investment cycle comes from) the hope is that demographic trends such as Gen Y ‘unbundling’ and homeownership aversion plus a recovery in the economy will grow demand to keep up with supply.
On the other hand (There’s always an OTOH) if these starts are not evenly distributed but concentrated in ‘hot’ markets, those markets are in for a wilder ride on the cycle than investors would like. In Seattle for instance your eight year old class A building is going to be fighting to preserve those A rents while 36,000 new units are delivered over the next five years.
See the whole NAHB article here: Production of New Apartments: Upward Trend Continues