NMHC survey: 37% raised pricing on projects on hold

Across all respondents to the National Multifamily Housing Council's September survey, 37% raised pricing on developments that had been on hold for three to six months and 14% lowered it.

In June it went the other way: 17% priced upward and 38% cut. Multi-Housing News reported the full results of NMHC's Quarterly Survey of Apartment Construction & Development Activity on September 25 in a story by Vicentiu Fusea. Building Design+Construction put the sample at 60 leading multifamily construction and development firms, surveyed September 1 through 18.

Starts slow as feasibility slips

Some 29% of firms said they started fewer projects than three months earlier. Another 24% started more, and the group reporting little change fell from 55% to 41%.

Firms that started fewer projects gave two main reasons, economic uncertainty and financial feasibility, each cited by 65%. Low rent growth came next at 59%, up from 42% in June. Another 24% pointed to the availability and cost of construction financing.

For developers who cannot count on stronger rent growth, higher rates could mean fewer projects pencil.

HUD and Census Bureau figures released September 17, reported by Multifamily Dive's Julie Strupp, put August starts in buildings of five or more units at a seasonally adjusted 344,000. That was down 15.5% from a year earlier and 22.5% from July, while permits for the same buildings reached 467,000, up 9.4% year over year.

Two cost gauges moving together

Asked whether costs outran inflation over the past three months, 33% said materials did, up from 22% in June and 10% in March, and 22% said labor did, up from 8% and 5%. The share saying labor costs simply tracked inflation fell from 67% to 53%.

Among firms starting fewer projects, economic uncertainty and financial feasibility were each cited by 65%.

The Southeast still leads the slowdown in starts

Among firms reporting fewer starts, 41% named the Southeast, including Atlanta, Charlotte and Orlando, down from 75% in June. Texas fell from 50% to 24% and the Rockies from 42% to 12%. Meanwhile, the share reporting fewer starts in every region rose from 17% to 29%.

The Southwest matched Texas at 24%. The northern West Coast and South Florida came in at 18% each, Southern California at 12%, and the Mid-Atlantic, Midwest and Northeast at 6% apiece.

A shrinking Southeast share looks like relief until you set it beside the rising all-regions figure. For a contractor or supplier working in several regions, that 29% matters more than any single metro's number.

Financing optimism cuts the other way

NMHC chief economist Chris Bruen said low rent growth, higher interest rates and rising labor and material costs are making deals harder to pencil. He added that respondents remain largely optimistic about construction conditions over the next six to 12 months, in comments published by Multifamily Executive's Christine Serlin.

Equity looks tight in the near term, with 25% expecting it to become less available over the next three months. Over six to 12 months, though, 39% expect more equity and 16% expect less. Debt looks better on both timelines: 16% expect more availability in three months versus 9% less, and 31% expect greater availability over six to 12 months.