U.S. home construction is surging back to pre-recession levels, but it’s not because people are building traditional suburban homes.
It’s because apartment building is on the rise.
Home builders began construction on 1.07 million homes in April at an annualized rate, up 13.2 percent from March, the Census Bureau said Friday. That’s the highest rate of home construction since November of last year, and the last time housing construction hovered consistently in the over 1 million homes-per-month annualized range was early 2008.
But homebuilding looks very different than it did six years ago. Today, apartments and condominiums are driving construction, instead of all-American white picket fence homes. In April, construction on structures with 5 units or more increased 42.9 percent compared with the month before, while construction on a classic single-family homes rose a measly 0.8 percent. It’s part of a new trend of young people moving to cities and raising demand for apartment units and rentals.
“It’s been a consistent story,” said Jed Kolko, chief economist with real estate firm Trulia. “Not only is multi-unit construction a larger share of overall starts than it was during and before the bubble, but a higher share of those multi-unit starts are intended for rent as opposed to condos.”
Rentals are in high demand as more people chose to live in densely populated cities and find it difficult to obtain a mortgage. In the first quarter of 2014, 93 percent of multi-family homes started in April were intended for rent, compared with around 60 percent during the pre-recession housing bubble, according to Census data.
During the recession, a lot of young people found themselves jobless and living at home. But as the recovery has picked up pace, young people have gotten jobs and are ready to move out. Much of the multi-unit construction is due to young people re-entering the workforce and renting their own flats. Plus, mortgage standards remain pretty tight after the recession, making it harder to buy a house.
Whatever the reasons, single-family, suburban homes simply aren’t the economic force they were before the recession.