WSJ reported today that housing starts increased 21% from last quarter and December starts were adjusted from a 4% decline to a less than 1% decline. Apartment construction for small buildings rose over 9% and for five or more units construction rose over 17%. These are big numbers for an industry that has been completely flat for some time.

While economists forecast a 5.9% increase in Jan housing starts, the pace was actually stronger than predicted. Starts have gone up three times over the past 6 months. The trend has been, with job loss, tenants double up to save money leaving many apartments in the East Bay vacant. Therefore virtually no new apartment construction has taken place in the East Bay for a couple years.

When the job market finally does pick up and tenants decide to move out and find their own place, the rental market will become exceedingly tight in a short amount of time. This will be compounded as job seekers move from the suburbs back into city centers to stake their claim (a job). It seems obvious to me that builders and developers are foreseeing the inevitable tightening of the rental market in the not too distant future.