Part of my general thesis behind a robustly recovering US economy was that we would see a marked increase in the construction of multi-family housing units.

The press continues to note the general strength of this segment but relative to my view of the economy it has continued to disappoint.

Here are Multi-Family starts over the last two years.

FRED Graph

That might look impressive until you compare it to what a real boom looks like

FRED Graph

The “hopeful” argument is that while the absolute increase is much smaller this time around the pace is actually a bit faster, a four-fold increase rather than a 3-fold increase.

However, given the current conditions in housing I was looking for an even stronger snap back. This alone will not be enough to push the economy into a boom. We need a series step-up in the rate of growth.

What’s worse from a long run perspective is that the failure of multifamily to bounce back potentially sets up single family for a new bubble. With rents tight and likely to get tighter, buying becomes a better and better deal.

This has the potential to bring out both investors and first time buyers in droves. That in turn will lead to an extremely rapid draw down in inventory, which leads to a stabilization in prices, which leads to looser lending standards which leads to a boom in buying.

That kind of instability is difficult to manage. Economic stabilization going forward would be better if there was a larger stock of multifamily rental housing, yet that is looking increasingly unlikely.