Multifamily Builder Confidence Improves, Nonresidential Construction Starts Decline, Jobless Claims
Multifamily Builder Confidence Improves
Sentiment among multifamily builders rose slightly in the fourth quarter of 2022, though it remained in negative territory by historical standards, according to the latest survey by the National Association of Home Builders.
The trade group said Thursday that confidence is still lagging based on two indexes it tracks on a quarterly basis, gauging multifamily production and occupancy. The fourth quarter’s production measure dropped two points from the prior quarter to 34 as occupancy sentiment rose four points to 49.
Surveys ask builders to score apartment and condo market conditions on a scale of zero to 100, and average numbers below 50 generally indicate negative confidence.
“Many developers continue to see strong demand for multifamily housing, but in some markets supply is catching up to demand,” developer Lance Swank of Sterling Group, chairman of NAHB’s Multifamily Council, said in a statement. “In most markets, developers face challenges with regulatory costs and delays, and obtaining financing for new construction.”
Robert Dietz, the trade group’s chief economist, said surveys show multifamily developers are expressing caution in the face of current demand conditions. He said production sentiment is consistent with the NAHB’s forecast that multifamily construction “will slow measurably” this year compared with strong rates sustained through most of 2022.
Construction Starts for Nonresidential Projects Decline
The value of newly started U.S. construction projects declined 27% from the prior month to $865.6 billion in January, as data firm Dodge Construction Network reported a decline in groundbreakings for high-profile “mega-projects” geared primarily to industrial and government uses.
January numbers showed overall building starts down 14% from January 2022. Nonresidential building starts declined 38% for the month and dropped 2% for the year, with residential starts decreasing 20% for the month and dropping 34% for the year.
“January’s decline in construction starts should not be taken as the beginning of a cyclical downturn in the industry,” Dodge Construction Chief Economist Richard Branch said in a statement Feb. 22. “Numerous mega-projects have begun over the last few months, obscuring the underlying trend in construction activity.”
Dodge in previous months pointed to numerous high-value construction projects that broke ground and are now fully underway. Several are large, commercial-focused facilities including data centers, warehouses and manufacturing plants.
In January, Dodge noted the largest nonresidential projects that broke ground included a $1 billion Prime Data Center campus in Elk Grove Village, Illinois, a $515 million Amazon data center in Hilliard, Ohio, and a $460 million CoStar Group corporate campus in Richmond, Virginia.
Jobless Claims Edge Down
Initial claims for unemployment declined 3,000 from the prior week to 192,000 for the week ended Feb. 18, the Labor Department reported Thursday in the latest indicator of U.S. labor market resilience.
The four-week moving average for initial claims rose 1,500 to 191,250 in the latest figures.
Continuing claims in all programs, tracked on a more delayed basis, totaled about 1.9 million for the week ended Feb. 4, an increase of 25,690 from the prior week but still below the 2 million claims for the comparable week of 2022.
Declining claims for unemployment insurance are the latest sign of an employment market that remains strong by historical standards, with the national jobless rate at a 50-year low of 3.4% as of January. This is even after several weeks of headlines about mass layoffs, primarily in the technology industry.
Elgin Development Group
Lou Hirsh CoStar News
- February 24, 2023