Apartment construction set to level off after years of building gains

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LAS VEGAS — Dallas-Fort Worth is the top apartment building market in the country.

So the outlook for the multifamily construction sector should be of interest to builders who are now constructing more than 35,000 North Texas apartments.

After several years of increasing production, housing economists foresee multifamily building leveling off during the next couple of years.

At its annual conference this week in Las Vegas, the National Association of Home Builders is forecasting that nationwide starts of apartments and other multifamily units will decline slightly this year and rebound by only a hair in 2020.

"In 2019 and 2020, we are pretty confident with the forecast we have with flat conditions," said Danushka Nanayakkara of the association’s forecasting and analysis department.

She said construction has caught up with demand in most U.S. markets, but so far there is not a glut of new apartments on the market.

Richardson-based RealPage — the apartment industry service provider — also sees a leveling in apartment building activity.

"Product already on the way points to a steady flow of apartment deliveries in the immediate future," said RealPage chief economist Greg Willett. "Nationally, completions should remain near 300,000 market-rate units annually in 2019 and 2020.

"There’s been no pullback in apartment development capital availability to date, and construction won’t slow in a big way until money sources scale back on investment activity," he said. "The RealPage forecast calls for apartment starts to cool mildly, perhaps around 10 percent, over the next couple of years, simply because fewer individual development proposals will yield targeted returns."

With the boom in apartments in the U.S. attracting a whole generation of younger residents, there’s been no huge rise in the homeownership rate.

Nationwide homeownership rates peaked at 69.4 percent before the Great Recession and fell as low as 63 percent in 2016. The percentage of Americans who own rather than rent their home has now risen to 64.4 percent.

"We think this is going to be the new normal," Nanayakkara said. "You are not going to see it again close to 70 percent."

One source of potential apartment renters remains thoroughly entrenched at home. Nanayakkara said millions of potential home renters and buyers are still in the nest.

"They are out of college but still living with their parents," she said. "This is about 5.6 million young adults.

"They might be just waiting to find jobs, and this might be the new normal too," Nanayakkara said. "This could be why we haven’t seen growth in the single-family market and in renters."

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