Builders looking to apartment, condo markets

By John Keough

While the housing market continues its rebound, several major builders are targeting the booming apartment/condo markets for future growth, according to various news reports.

The Lennar Corp., one of the country’s largest home builders, recently announced plans to construct nearly $1 billion of multi-family units over the next three years.

Plans call for 6,500 apartments, 3,000 of which will be started this year. The first projects are a $36 million, 316-unit community in Jacksonville, Fla. in partnership with Carlyle Group LP, and a $32 million, 264-unit community northeast of Atlanta.

Meanwhile, Toll Brothers, the nation’s largest builder of luxury single-family homes, is making a bigger push into the condo market with the purchase of land near Washington, D.C. It has also purchased two more buildings in Manhattan to be developed into condos, making it the seventh and eight buildings it has bought in that section of New York, reported.

The company is also expanding its rental operations.

Toll plans to develop some 600 apartments on two adjacent sites along the Capital Riverfront near Washington, D.C., according to the Wall Street Journal. Construction should start later this year, and the first phase of about 300 units will take about 24 months. The company is already building more than 400 rental units in Jersey City, N.J., and it has a joint venture working on nearly 400 more in Plymouth Meeting, Pa.

Other markets reportedly under consideration stretch from Washington, D.C., to Boston, and the company could soon start looking at the West Coast.
It is no wonder companies want to expand into the rental market. A total of 242,000 apartment units were under construction in November.

The single-family home market also continues to do well.

Builder confidence in the market for newly built, single-family homes was unchanged in January, remaining at a level of 47 on the National Association of Home Builders/Wells Fargo Housing Market Index. This means that following eight consecutive monthly gains, the index continues to hold at its highest level since April of 2006.

“Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery, which should bode well for future home sales later this year,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “However, uncertainties stemming from last month’s fiscal cliff negotiations contributed to the pause in builder confidence and continuing discussions among policymakers related to spending cuts and the future of the mortgage interest deduction could put a damper on housing demand in the coming months.”

“Builders’ sentiment remains very close to the index’s tipping point of 50, where an equal number of builders view conditions as good and poor, and fundamentals indicate continued momentum in housing this year,” said NAHB Chief Economist David Crowe. “However, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery.”

Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales.

The index’s components were mixed in January. The component gauging current sales conditions remained unchanged at 51. The component gauging sales expectations in the next six months fell one point to 49 and the component gauging traffic of prospective buyers gained one point to 37.

Also, the U.S. Department of Commerce reported last week that home building rose in December and finished the year with the most new homes started since 2008.

Housing starts rose 12.1% last month to a seasonally adjusted annual rate of 954,000. That was the highest level since July 2008.

Compared with a year ago, new-home construction was up 36.9%. For all of 2012, 780,000 new homes were started, the most since 2008.

Despite all that good news, the Journal noted that housing starts are still below traditional historical levels. Builders have started construction on an average of 1.5 million new homes a year since 1959.

Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at or

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