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Home Construction Picked Up in June, Driven by Multifamily

In June, US housing starts increased by 3% to an annualized rate of 1.35 million, primarily due to a significant 19.6% rise in multifamily construction.

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Good morningU.S. housing starts rose in June, largely driven by a surge in multifamily construction. Plus, NYC is seriously considering mandating that landlords provide AC for tenants in the summertime.

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Housing Starts

Home Construction Picked Up in June. Multifamily Housing Is Why.

In June, US housing starts increased by 3% to an annualized rate of 1.35 million, primarily due to a significant 19.6% rise in multifamily construction.

Single-family: Government data released Wednesday shows that single-family housing starts to fall by 2.2%, reaching an annual rate of 980,000 units. Despite this decline, single-family starts have increased by 16.1% year-to-date in 2024. High mortgage and construction loan interest rates have dampened single-family production and demand.

Building permits: Overall, residential building permits rose by 3.4% to an annualized rate of 1.45 million units in June. Single-family permits decreased by 2.3%, while multifamily permits surged by 15.6% to an annualized pace of 512,000 units. Homebuilder confidence hit a yearly low amid high mortgage rates and weak demand, prompting builders to offer incentives and cut prices.

Completions: Multifamily completions hit a seasonally adjusted annual rate of 673,000 in June, the highest since May 1986. However, the total number of units under construction decreased, with single-family homes down by 1.3% and multifamily units by 1.6%. The number of multifamily units under construction is at its lowest since August 2022.

➥ THE TAKEAWAY

Big picture: Multifamily projects are buoying the housing market, while single-family construction faces headwinds from high mortgage rates and affordability issues. Despite this, builders have a more optimistic six-month sales outlook, anticipating lower rates as inflation eases.

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✍️ Editor’s Picks

  • Eviction boom: Eviction rates in major Sunbelt cities like Houston, Phoenix, and Las Vegas are up as much as 35% post-pandemic, contrasting with stabler rates in other major metros.

  • Not again: Over 200K CenterPoint Energy customers in Houston were without power for one week after Hurricane Beryl hit, highlighting ongoing problems with the TX private electrical grid.

  • Global retreat: Foreign purchases of US homes hit a new record low, plummeting 36% to just 54.3K properties, with Canadians leading at 13% of all purchases.

  • Rate outrage: Allstate (ALL) wants to hike California homeowner insurance rates by 34%, impacting 350K+ policyholders, particularly in fire-risk areas.

  • REIT renaissance: Publicly traded property owners are finally seeing a rebound, with real estate stocks up 4.41% and office REITs up 9.8%.

  • Are we there yet? Wall Street remains unfazed as the US Treasury market absorbs even more debt, with a $1.9T deficit forecasted for 2024. Meanwhile, yields remain below 4.2%.

  • Unloading risk: Privately traded FS Credit REIT acquired $351.8M in loans as US banks shed lower-valued real estate tied to higher interest rates.

🏘️ MULTIFAMILY

  • Summer chill: NYC is seriously considering mandating landlords to provide AC for tenants in summertime, with fines of up to $1,250 per day for non-compliance.

  • Sky's the limit: The LA Planning Commission approved The Bora, a 153-unit apartment complex, to replace a shuttered restaurant despite a union appeal for further study.

  • Multifamily momentum: Multifamily absorption rates shot up in 2Q24, with 138K units absorbed and vacancies down 10 bps, as YTD absorption reaches 75%.

  • Campus innovations: UC San Diego is planning a $2B student housing village with 6 towers and 6K beds at 20% below market rates.

  • Changing hands: Interface Properties just bought Brantley Pines in Fort Myers, FL, from The Inland Real Estate Group for $57M, or around $192.6K per unit.

  • Shot in the foot: Biden's national rent control plan will cap increases for large landlords at 5%, potentially discouraging investment and worsening the housing crisis.

🏭 Industrial

  • Kansas cash flow: Ares Management and Northpoint Development secured $244M to refinance a 10-building warehouse complex in Kansas City.

  • Studio success story: The Burbank Studios in CA was repurchased by a group of investors for $375M from Warner Bros. Discovery (WBD), with plans for new sound stages.

  • Industrial boom: National industrial net absorption rates more than doubled to 46.3 MSF nationally in Q2, with rents hitting $9.97 PSF.

🏬 RETAIL

  • Massive mixed-use: The Reagan Center in Florida just received a major approval. The mixed-use project will include 1.4 MSF of office space, 300 KSF of retail, a 250-room hotel, and over 1K apartments.

  • Mall makeovers: Pacific Retail Capital Partners just invested $425M in two SoCal malls to reinvigorate 1 MSF and reposition them for new uses amid retail distress.

  • Retail riches: Structure Capital bought the majority of Shoppes at Monterra Commons in Cooper City for $18.5M, fully leased with diverse tenants.

🏢 OFFICE

  • Concessions crunch: Effective rents for office properties are 21.1% below asking rents, as struggling offices face rising operating expenses.

  • Debt distress: Joseph Horn, landlord of One Parkway North Boulevard in Chicago, struggled to pay off $12.7M debt last month in a distressed real estate market.

  • Lots of potential: Law firm Michael Best & Friedrich is moving to a 25 KSF office in downtown Salt Lake City, emphasizing the new location’s ample amenities.

  • Meta’s modest move: Meta (META), the parent company of Facebook, will soon downsize its Denver office from 47 KSF to 24 KSF by March.

🏨 HOSPITALITY

  • Mirage memories: The 3K-room Mirage in Las Vegas, which opened in 1989, is finally closing after 35 years in business. The iconic casino permanently changed the face of the Strip. 

  • Deal of the day: Host Hotels & Resorts (HST) acquired 1 Hotel Central Park in Manhattan from Starwood (STWD) for $233.8M, or over $1M per room.

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📈 CHART OF THE DAY

According to Costar, there’s been a notable multiyear increase in the sales of properties financed by CMBS loans nearing maturity, indicating investor profit-taking amid persistently high interest rates.


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