Tight multifamily vacancy supports permit surge. Across the residential sector, permit activity climbed in August. The rise was mostly attributed to multifamily, as filings for single-family houses remained relatively in line with preceding months. Meanwhile, apartment permits soared 15 percent month over month, reaching the highest level since June 2015. Greater construction is warranted by extremely tight vacancy, as apartment availability in June fell below 4 percent for just the second time in the past 20 years. Preliminary data points to additional downward vacancy pressure in the third quarter, reiterating the housing shortage and putting upward pressure on both rents and home prices.

Large 2022 pipeline imminent, but ceiling is capped. Residential starts in August were up year over year, even as single-family groundbreakings tapered over the past few months. The 53 percent annual advance in multifamily starts spearheaded the rise. Some previously stalled developments pushed forward as the lumber price index retreated by 36 percent over the past two months. Still, the cost of lumber remains 30 percent above the pre-pandemic level. Elevated material costs and labor shortages limit the potential supply output next year, but recent permit activity and starts signal a weighty pipeline nonetheless. Early forecasts project 400,000 apartments will finalize, while the single-family addition will be the largest since 2006.ents higher. The average effective rent in the U.S. is expected to jump 2.8 percent in 2021 to $1,451 per month.

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* Sources: Marcus & Millichap Research Services; Capital Economics; Freddie Mac; Moody’s Analytics; Mortgage Bankers Association; National Association of Home Builders; National Association of Realtors; RealPage, Inc.; U.S. Bureau of Labor Statistics; U.S. Census Bureau; Wells Fargo