Are Renters Driving the Home Construction Rebound?

March 21, 2013

Renters are playing a large role in the home construction industry — a much bigger role than they traditionally play, Fortune reports. 

Construction of multifamily homes is making up about 33 percent of all of today’s residential construction, which is notably higher than the average of nearly 20 percent over the past two decades.  

What’s driving the rise in the multifamily market? Following the financial crisis, a record number of foreclosures displaced millions of families who suddenly found themselves renting apartments instead of owning a home. Plus, tight lending standards are forcing some potential home buyers to sit on the sidelines and rent until lenders loosen up. 

“Demand for rentals is also expected to soften over time as recovery of the overall housing market, which is closely tied to the wealth of most Americans, is expected to lead to a broader recovery of the economy,” Ruijue Peng, chief research officer at CoStar, a firm that tracks commercial real estate, told Fortune. 

However, Peng expects that the next three to five years to continue to be strong for the multifamily market. 

But the single-family construction market is catching up, posting some big gains recently. In February, construction of single-family homes rose to the highest level since June 2008, the Commerce Department reported Tuesday. Also, building permits -- an indicator of future building -- rose to four-year highs in February as well. 

Source: “Why Renters Are Still Driving America's Building Boom,” Fortune (March 20, 2013)

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