Why the Increase in Apartment Construction Isn't All Good News

[Purveyor]

by Victoria Stilwell
July 17, 2015 — 10:18 AM EDT

The housing market looks like it's finally starting to get its mojo back. Friday's starts data surprised to the upside and showed new-home construction last month rose to its second-highest level since 2007, with much of that gain being driven by apartment projects.

While that's good news for the growing number of Americans eschewing homeownership, it could also mean the housing market improvement packs a slightly smaller economic punch, according to Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pennsylvania.



Each multifamily housing start creates about two jobs over the course of the year, while each single-family start creates four or five, he said. Apartments are usually smaller than single-family homes, and less building materials are often needed. There's also a trickle-down effect involved when people buy a home because they also have to buy all the things that go into it. Smaller spaces theoretically mean less stuff bought to fill them, which means relatively less demand for that stuff, which means fewer people needed to make that stuff.

Future construction of single-family homes may be poised to pick up, even after starts for those structures eased in June to a 685,000 rate from 691,000 a month earlier. Permits for single-family homes rose to the highest level since January 2008, meaning there should be an increase in ground-breakings in the coming months.

Still, the increase in apartment construction is an unalloyed positive for the economy, said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. For many young adults, renting is their first foray into housing. As they settle down, get married and have children, buying a home and all its trappings follows.

more...

http://www.bloomberg.com/news/articles/2015-07-17/why-the-increase-in-apartment-construction-isn-t-all-good-news

[Warpy]

1. The difference with apartments is that the landlord buys the big ticket stuff

like heating units, appliances, security systems. Downsizing is going to be a fact of life for the foreseeable future, people no longer wanting those 2500+ square foot monstrosities that are so hard to heat and keep clean and maintained. The tiny house movement is the most extreme example of this. Most people will want to be a bit more sensible about things and live in flats or starter houses.

The problem is that starter houses have been underbuilt for too many years, the profit on a McMansion being so much greater. In any case, people with high debt loads from college are probably going to be renting. For them, the boom in apartment construction is probably a good thing, at least in the short term.

[snooper2]

2. I went from 1400 to 3400 square feet, both houses all electric, my bill went down

30 year newer has much better construction-

previous house built in 76'

[Nay]

3. New starter houses have certainly been underbuilt, both for young prospective

homeowners AND for retiring baby boomers. Mr Nay and I have looked for a smaller house, but the few that are being built are horribly expensive. Existing small houses are located in predominantly low-income and/or iffy neighborhoods. Building your own home on your own lot is too expensive.

The other difference with apartments (for the young) is that they really have no idea if the job they have at the moment will end in the next moment, forcing them to move out of town or out of state; who needs to be tied to a house?

[Warpy]

4. If you can live outside a city, consider a mobile home

on a permanent foundation. Those are often the easiest and most reasonable way to downsize. In addition, they're very well planned out, easy to live in, easy to maintain. Just have a storm cellar dug if you're in tornado country.

I was lucky, I had the down payment in 1996 when interest rates finally fell and I found a 1946 starter house in one of the worst areas ("The War Zone&quot of this city.

A lot of the yuppie barns built here in the 00s were snapped up by out of state speculators and have never been lived in. They never appreciated, either, and some have been so damaged by thieves and vandals they will never be lived in. They are too poorly planned to be turned into multi family dwellings. Most will be bulldozed.

Starter homes haven't been built here for a long time, except as townhouses. Those are better than apartments, but just. The best option I found before interest rates came down was a trailer. I loved that thing and if I could have moved it into town, I would have.

[Nay]

6. My BIL was downsized at about age 56 and they went straight to a large bus-type

RV. They bought a pad in an out-of-the-way Western town and stay there in the summers; when the snow flies, they stay in AZ, NM, etc. It's worked for them. I think Mr Nay would love this but I'm pretty sure I wouldn't. Too cramped, no place to do anything, etc. Now, if all a person does is surf the net and watch TV, it could work. They're 10-12 years younger than we are, too, and that makes a difference. All that moving around can be too physical as you age.

My problem with townhouses is the unpredictability of the monthly fee -- too many people think they have a cheap place to live until the fees start going up, up, up. My brother was astounded at some of the fees when he checked into it; he could rent an OK apartment for $100 more a month and not have to bother with maintenance, etc.

Trailers are indeed inexpensive, but many old folks are finding their mobile home parks being sold out from under them, esp in FL.

[Warpy]

7. I know that about parks, which is why I said permanent foundation

which means on your own land outside town. I know condo fees are insane, most of them are higher than any rent I've ever had to pay.

The RV idea didn't appeal to me because I have a couple of floor looms and even the small sample loom couldn't have been shoehorned into one of those with their "conversational" plush seating and other crap I'd never use.

So here I sit in my slum that has become home over the years. I have good neighbors and can't ask for much more than that.

[spanone]

5. it's absolutely fucking insane the amount of apartments they are building in nashville, TN.

insane. and expensive as hell.

they build them, fill them, sell them.