Multifamily Leading Surge in New Home Construction

By Ryan Dosen

 

New home sales are spiking and builders are investing more and more money to supply an increasing demand for housing. This trend continues not only nationally, but also locally. Local builders, forced to scale back operations after the real estate collapse of the late 2000s, are seeing market conditions improving and inventories remaining low. They are now buying up land, ramping up operations, and looking forward to a very promising near term for new home construction.

 

New Home Sales Rise 10.7 Percent

The National Association of Home Builders (NAHB) recently reported that the sales of newly built, single-family homes jumped 10.7 percent in October to a seasonally adjusted annual rate of 495,000 units. Builders seem to have seen this coming and they continue to buy more land and build more homes. Tom Woods, chairman of the NAHB and a home builder from Blue Springs, MO, says that “our builders are reporting continued optimism in the housing market, and are adding inventory in anticipation of future business.”

And for new homes, year-over-year growth is even more impressive. David Crowe, NAHB’s Chief Economist, revealed that “sales this year are running 15.7 percent ahead of 2014.” Crowe also says that “with a firming job market, affordable home prices, and rising pent-up demand, today’s report is another indicator that the housing market continues to move on a modest upward trajectory.”

 

Multifamily Construction Leading the Surge

The NAHB also reports that total private residential construction spending for October increased to a seasonally adjusted annual rate of $399 billion. A month-over-month breakdown of these numbers reveals a 1.6 percent gain in private single-family spending ($226 billion) and a 1.4 percent gain in private multifamily spending between September and October. More interesting, however, is that the pace of multifamily spending has risen 28 percent since October 2014. Single-family construction spending is up 11 percent in the past year, but the real growth is being driven by the multifamily side of the business.

 

Local Builders Betting on the Recovery

Local home builders are also getting in on the action, looking to buy up buildable land and lay more foundations, especially before the harsh winter months settle in. Scott Megill, co-owner of award-winning luxury home builder Megill Homes of Chadds Ford, PA, says “we feel confident in the market and we are working hard procuring land to fill the built up demand for our clients.”

Wayne Megill, Jr., also co-owner of Megill Homes, says “I think we are finally at that tipping point where homebuyers are willing to spend a little more for new construction.   The last 5 years have been fantastic from the standpoint of product advancements regarding energy efficiency, high performance materials, and designer products.  As homebuilders, this allows us a greater opportunity to present value to clients on a new home versus a used home.  While it is hard to compete on a price-per-square-foot basis with used homes, we can now really provide a value based on cost of ownership and enjoyment of living scenarios.”

It should be noted that Megill Homes has recently been purchasing local land for high-end single family residences, but it is in the middle of selling a larger-scale investment: a multifamily, 26-unit luxury townhome community named Jefferson Square at Media. And so the trend continues, with housing expanding and multifamily leading the way.

 

– Ryan Dosen manages The Wayne Megill Real Estate Team of Keller Williams – Brandywine Valley in West Chester, PA. Contact Ryan Dosen to inquire about buyer or seller representation or to learn more about a career in real estate by emailing ryan@waynemegillteam.com or calling 610-399-0338.

This article was published by 21st Century Media and the Daily Local News (West Chester, PA). To read this article on the the newspaper’s site, please visit the Daily Local News.

Check out Ryan Dosen’s other 21st Century Media real estate columns.