Rising interest rates, tightening lending and flat rents in some parts of the country have real estate companies from California to Florida waiting on funding that may not come soon.
+500 days the average apartment project takes from permitting to the construction phase (45% increase from 2019)
Multifamily units set to start construction in April fell to 322,000, the lowest since 2020, as developers cut back on projects
Robert Dietz, chief economist at the National Association of Home Builders, said deals and financing have dried up.
Total apartment construction starts, 1,000 units: 322,000 April 2024
US Construction Spending Million Dollars: Total Construction Spending 2,099,039, April 2024
Total residential construction expenditures: 75,788, April 2024
What about Boise? Cities like Worcester and Boise are attracting newcomers with their low cost of living. In August 2021, Boise's annual asking rent growth hit a record high of 25%. Home prices in the surrounding counties increased 79% between 2019 and 2022.
Rising rents have led to 500,000 new apartments opening in 2023, the highest inventory in the past 40 years, and analysts expect another 500,000 to open in 2024.
The cold snap has made it harder for many local banks to repay commercial real estate loans they already hold, and banks are no longer lending as much to apartment builders.
Interest rates are also scaring away investors. Some builders whose ongoing projects have seen investors pull out or financing methods change have put projects on hold or implemented strategies such as adding affordable housing to attract government funds.
Sources: After Historic Apartment Boom, Developers Hold On to Vacant Lands, Will Parker, wsj.com; Figure 1: Data—Yardi Matrix; 2024 data is from Q1; Figure 2: Data—Marcus & Millichap Research Services, Yardi Matrix, U.S. Census Bureau (via Federal Reserve Bank of St. Louis), Realpage
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