Rentals Drive Return of Residential Development

"As residential building recovers from a near standstill after the housing crisis, much of the momentum is coming not from subdivisions with green lawns and two-car garages but from rental apartments," say Dewan and Schwartz. "Multifamily construction nationwide is two-thirds of the way back to its prerecession peak, while single-family home construction is still only about a third of the way back to its peak, said David Crowe, the chief economist of the National Association of Home Builders."

Led by cities across the South and West such as Houston, Denver, Oakland, Seattle, Miami and Charlotte, builders are responding to pent up demand by young people moving out of their parents' homes, unleashed by an improving job market.

“The demand for building is all over the country, really,” said Ric Campo, Camden Property’s chairman and chief executive. “We’re seeing higher rents, faster lease-ups, lower construction costs — everything you want to see. Part of it is there’s just a pent-up demand for new product because we didn’t build anything during the downturn.”

While some fear the current surge could lead to overbuilding, "Andy McCulloch, the head of residential research at Green Street Advisors, a real estate analysis firm, said it was a misconception that growing momentum in the single-family housing market would hurt the rental market."

“If I was an apartment landlord, the only thing that would really freak me out from the buying side is the return of easy credit,” he said. “But that doesn’t seem to be coming back anytime soon.”