Report: U.S. Multifamily Starts Jump in January

Wells Fargo's Economic Group reported today that starts of new multi-family homes spiked 77.7 percent in January to a 183,000-unit pace, the second consecutive monthly increase. Permits for future starts, however, fell 23.8 percent in January. The decline in permits was likely pay back for the jump in December, which, according to the Department of Commerce, was due to builders rushing to apply for permits before new building codes became effective in January. Permits for new projects continue to run well above starts, which suggests the recent trend is likely sustainable and starts should continue to improve over the next few months. Much of the increase in multifamily starts can be attributed to demand for apartments, which has improved considerably over the past 18 months. The apartment market appears to be in full recovery. Declining homeownership rates have helped to offset the slower rate of growth in household formations. Vacancy rates have fallen modestly over the past year while rents have increased and rent concessions have fallen. Leasing in apartments is being fueled by the return of traditional renters to the market.