Multifamily Housing Market Will Decline in 2024 while Remodeling Market Will Hold Steady

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Contacts: Elizabeth Thompson
ethompson@nahb.org
(202) 266-8495

Stephanie Pagan
spagan@nahb.org
(202) 266-8254

Multifamily starts are predicted to decline in 2024, according to the National Association of Home Builders (NAHB). Meanwhile, the remodeling sector remains on solid ground and will hold steady this year.

Multifamily starts totaled 472,000 units in 2023, down 14% compared to the previous year. NAHB is projecting that multifamily starts will fall 20% this year to a 379,000 total.

“Multifamily construction is forecasted to post a large decline in 2024 as the number of units currently under construction — approximately 1 million — is near the highest level since 1973,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis, at a press conference held during the NAHB International Builders’ Show in Las Vegas. “Tight lending conditions and the and the high cost of development loans continue to hinder additional multifamily housing production.”

As these new apartment units come online, rent growth will slow, helping to ease inflation, noted Nanayakkara-Skillington. However, this new supply will chill the market before stabilizing in 2025. NAHB is forecasting for 388,000 units in 2025.

In addition to tight lending conditions and the high cost of development loans, a shortage of skilled labor is another headwind facing the multifamily market, as well as the overall housing market. The industry is short more than 400,000 workers, and this challenge will grow worse as building rebounds.

“Attracting skilled labor will remain a key objective for construction firms in the coming years,” said Nanayakkara-Skillington. “Efforts by the Home Builders Institute and state and local home builders associations to promote workforce development are critically important to help address the shortage of workers.”

Meanwhile, residential remodeling activity is estimated to hold steady and remain flat in 2024 compared to 2023. Remodeling growth is expected to post a nominal 2% gain in 2025.

“While we may not see growth in the remodeling market this year, it still remains on solid ground,” said Eric Lynch, an economist with NAHB. “Many demand-side factors, including the low inventory of homes on the market, aging housing stock and growing equity owners have in their homes, continue to support remodeling demand.”

Lynch also noted that the NAHB/Westlake Royal Remodeling Market Index (RMI) was down slightly year-over-year for the fourth quarter of 2023 but remained in positive territory with a reading of 67, well above the break-even point of 50.

The NAHB/Westlake Royal RMI also surveyed remodelers on their availability of labor. The top five fields that remodelers reported shortages in include: carpenters-finished, carpenters-rough, framing crews, bricklayers/masons and concrete workers. Like the overall housing market, labor shortages will continue to be a long-term issue, noted Lynch.

Building material and product shortages have also been an issue for the industry. NAHB data show that the products most difficult to get are appliances, windows and doors, HVAC equipment, plumbing fixtures and fittings and cabinets. “However, on a positive note, these shortages have improved compared to 2022,” said Lynch.