Spike In Multifamily Completions Solidifies Supply As A Near-Term Threat

The number of multifamily developments completed in June increased 40.2% from a year earlier, confirming the supply wave multifamily owners and developers have been dreading.

There were 656,000 units in projects of five units or larger delivered in June, a 26.2% month-over-month increase, Multifamily Dive reported, citing U.S. Census Bureau and Department of Housing and Urban Development data.

While insiders are hopeful the oversupply phenomenon will be relatively short-lived and demand will regain its position over supply, multifamily starts in June ticked up month-over-month. 

Developers started 360,000 apartment projects in June, a 23.4% decrease from a year earlier, but a 22% increase from May 2024, Multifamily Dive reported. Apartment permits also saw a monthly jump with 460,000 pulled, a 19.2% increase from May and a 6.5% decrease from the previous year.

The supply wave has brought 50-year high deliveries to certain markets, like 40,000 units hitting the market in Dallas-Fort Worth over the past year. The increased competition is slowing rent growth, especially in booming Sun Belt markets.

Many multifamily developers and landlords hope dropping construction starts due to increased interest rates, construction costs and cost of capital will eventually push rent growth up again. 

But some developers are finding land sellers getting more flexible in their terms. That, combined with reduced labor costs, offers opportunities for long-term development despite the high deliveries, Multifamily Dive reported. Charleston, South Carolina-based Woodfield Development launched 10 projects last year and is on track for just as many this year, founding partner Greg Bonifield told the outlet.

Movement on pricing has “finally” started, he said, and subcontractors are offering pricing that makes deals easier.

“Even the markets that feel a little overbuilt right now look really good within 18 months at most,” Bonifield told Multifamily Dive. “So we’re taking the approach that now is a good time to get shovels in the ground and start new projects.”

Housing starts including single-family homes were at about 1.4 million in June, a 3% increase from May but a 4.4% decrease from last year, the HUD report shows. 

Overall housing completions came in at 1.7 million, a 10.1% increase from May and a 15.5% increase from June 2023. The data shows that multifamily is largely driving the supply wave: Single-family housing completions rose only 1.8% from May while multifamily completions rose 26.2%.