Dive Brief:

• Starts for buildings with five or more units dropped 15.7 % year over year to a seasonally adjusted rate of 317,000 in September, according to a monthly report from HUD and the U.S. Census Bureau. They fell by 4.5% from August 2024.
• Developers pulled permits for a seasonally adjusted rate of 398,000 apartments in buildings with five units or more, a 17.4% YOY drop and a 10.8% decrease compared to August 2024.
• At the end of September, 825,000 units were under construction, a 16.8% YOY decline and a 3.5% month-over-month decline. 

Dive Insight:

Overall, housing starts came in at a seasonally adjusted annual rate of 1.4 million in September — a 0.7% decline YOY and 0.5% versus August 2024. Single-family builders broke ground on 1 million homes — a 5.5% YOY increase and 2.7% above August’s numbers.

“With the Federal Reserve beginning an easing of monetary policy and builder sentiment improving, single-family starts posted a modest gain in September while multifamily construction continued to weaken because of tight financing and an ongoing rise in completed apartments,” Robert Dietz, chief economist for the National Association of Home Builders, wrote on the association’s Eye On Housing blog.

Multifamily developers completed an annualized 671,000 apartments in buildings with five or more units in September, a 41.9% YOY jump and an 8.7% decrease compared to August. 

These new apartments are proving challenging to landlords in some of the hotter markets. Out of the top 30 metros tracked by Yardi Matrix, rent growth was positive in eight out of the top 10 markets with the least supply growth, with negative growth in eight out of 10 markets with the most supply growth.

The Sun Belt has shown the deepest negative rent growth, with Austin, Texas, at -4.9%, Raleigh, North Carolina, at -3.1% and Phoenix at -2.4%.

“The supply wave has been a big wind in our face, especially in our Sun Belt markets,” Jason Kern, president of investment management for Atlanta-based owner Cortland, told Multifamily Dive.

However, Kern expects a dropoff in deliveries in early 2025. “You can just see the numbers with the starts dropping off in late 2022 starting to reverberate and echo [in deliveries],” he said.

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