Multifamily construction remained stronger than single-family construction across the majority of districts in the Federal Reserve’s latest Beige Book, an anecdotal report from the Federal Reserve District and Banks. Overall in single-family housing, things slowed considerably since June, when all districts reported housing strength.
However, the book states that the rise in multifamily construction comes at time when Americans want to pursue purchasing their own property, but continue to face tighter lending and credit standards.
It’s important to note that the majority of the overbuilding during the housing bubble was single-family properties, and the challenge of saving for a downpayment after the recession – coupled with tight mortgage credit – continues to hold back homeownership, creating more demand for rentals, explained Trulia (TRLA) chief economist Jed Kolko.
“Together, those two factors mean that the market needs a higher-than-usual share of new multifamily buildings compared with single-family homes,” he said.
Construction and real estate activity continued to improve in September, with residential construction increasing moderately on balance, growing at a stronger pace in Minneapolis and Dallas.
Residential real estate activity continued to improve at a moderate pace in most districts due to increasing home sales and prices, coupled with low levels of inventory.
For instance, home sales in New York and Dallas remained strong, while Philadelphia, Atlanta and Chicago experienced a more modest improvement in home sales.
A number of districts reported concerns from homebuilders and Realtors over rising mortgage rates.
However, not all cities are experiencing the consequences of rising rates, specifically Dallas, which still has affordable homes despite higher rates.
Financial conditions were little changed on balance from the prior reporting period, with overall loan growth remaining modest in most districts.
Nonetheless, reports on mortgage lending were mixed.
Several districts noted a decrease in mortgage lending, citing higher mortgage rates and reduced refinancing activity.
However, mortgage originations continued to rise in Philadelphia, Richmond and Dallas, while rising home prices led to an increase in home equity lending in Chicago and San Francisco.