Remodeling Market to Remain Steady According to the National Association of Home Builders, multifamily starts are forecasted to decline this year while remodeling activity remains steady – both predictors are expected to have strong years this year.
Multifamily starts totaled 472,000 units in 2023, down 14% year-over-year. According to NAHB estimates, multifamily starts are projected to decline even further this year by 20% and reach 379,000 total starts.
Danushka Nanayakkara-Skillington, NAHB’s assistant vice president of forecasting and analysis, presented this prediction at a press conference held during the NAHB International Builders’ Show in Las Vegas. “Multifamily construction is expected to experience a steep decrease in 2024 due to tight lending conditions and higher costs associated with development loans that continue to limit further multifamily production,” she noted.
As new apartments come online, rent increases will likely decrease and inflation decrease, according to Nanayakkara-Skillington. But due to an influx of supply in 2025 (NAHB has projected 388,000 units), prices could temporarily fall before stabilizing again by then.
Tight lending conditions and high development loan costs aren’t the only challenges facing the multifamily market; skilled labor shortages also pose an obstacle. Industry estimates show an acute labor deficit of more than 400,000 workers; this problem will only compound as the housing industry rebounds.
Nanayakkara-Skillington noted that construction firms’ main goal in the coming years will be acquiring skilled labor. Workforce development initiatives initiated by Home Builders Institute and state/local homebuilder associations could prove essential to combating labor shortages.
Remodeling activity is projected to remain steady compared to 2023, while growth should experience a marginal 2% bump by 2025.
Eric Lynch, an economist with NAHB noted, “While we may not experience growth in remodeling demand this year, it remains firm.” Eric cited various demand-side factors including low inventory on the market, an aging housing stock and increasing equity owners have in their homes which continue to support remodeling demand as factors.
Lynch also reported that the NAHB/Westlake Royal Remodeling Market Index (RMI) experienced some decline year-over-year for the fourth quarter, yet still managed to register positive growth with an index reading of 67, comfortably above its breakeven point of 50.
NAHB/Westlake Royal RMI also conducted a survey among remodelers on labor availability. Remodelers reported labor shortages across five areas: carpenters-finished, carpenters-rough, framing crews, bricklayers/masons and concrete workers – similar to overall housing market challenges. Lynch noted that labor shortages will remain an ongoing challenge.
Building material and product shortages remain a significant problem in the construction industry. According to NAHB data, appliances, windows/doors/A/C equipment/HVAC equipment/Plumbing fixtures & fittings/cabinets are all difficult items to source compared to 2022 but have since improved, according to Lynch. “[However,] on an optimistic note these shortages have increased compared to then”.