Single Family Home construction spending is showing steady growth since 2012, according to the National Association of Home Builders analysis of Construction Spending census data. Compare that to the accelerated building in 2004-2006, just before the housing bubble burst and subsequent market crash! Still, construction spending is just around half of what it was at the peak in 2006. What does this mean? Well, it appears to be a more healthy and perhaps sustainable growth rate and may indicate a stronger economy.
What is also notable is the explosion of multi-family home construction spending since 2012. With millennials preferring employment status in larger companies, they are moving to cities and overall prefer to live closer to work, spurring development of luxury apartments, compounded by increasing home prices making renting more feasible while they save up larger sums of cash for the escalating down payment pricing.
Bay Area construction has showed a high number of multi family real estate projects being built, right off highway 101 in San Mateo, to Santa Clara Square in the South Bay, to Dogpatch area in San Francisco and over in Oakland. What is concerning, though, is that these are all high price points for the area and are attainable for high wage earners, not so much for the lower and middle working classes. While some cities, such as San Francisco, require a few units of each project to be eligible for BMR pricing and customers, there still do not seem to be enough, as investors are looking to capitalize on luxury housing at the highest price points.
We will continue to monitor this trend. What happens if these larger companies have layoffs? What happens during the next market downturn? What future trends will help the lower and middle income wage earners to afford housing in the Bay Area?
More information here: http://eyeonhousing.org/2017/08/private-residential-construction-spending-dips-in-june/