Apartment development has slowed down significantly over the past several quarters. That restraint on the part of developers makes sense, given current market conditions. But now, it’s perhaps gotten to a point where some in the industry are wondering how much lower things can go.The latest government data show that in October, there were just 240,000 apartment units under construction and 200,000 units were added to the market. But the kicker is in the construction starts numbers: starts for projects with five or more units fell over 33% to 48,000, seasonally adjusted.In case you were wondering, yes, that is the lowest figure since the government started tracking this information in 1963.It may not seem like that big of a deal as it stands, but when put into context, the decline in production probably has many in the industry scratching their heads in confusion.Take some points brought up by Paul Emrath, assistant vice president of housing policy research for the National Association of Home Builders, in a recent brief from the organization:

  • There have been extended periods of time-for instance, from August 1994 to October 2008-where monthly starts never dipped below 200,000 units.
  • Until April 2009, multifamily starts had never hit the 90,000-unit mark, and since then, it’s fallen below 90,000 only four times.
  • In fact, the lowest starts figure ever recorded was in July and September of this year, when developers kicked off 72,000 units in each of those months.

While it remains to be seen whether this is a momentary blip or a sustained trend (the next data set comes out next week), the steep decline in starts does say something about developers’ confidence in market fundamentals.I can’t say I blame them, though-the vacancy rate for buildings with five-plus units also hit an all-time record in October, at 13.1%. That’s up from 11% at the beginning of the year. Government programs promoting homeownership are potentially working, as the homeownership rate went up 20 bps in the third quarter to 67.6%. The market is becoming even more crowded as condo buildings revert and individual condo owners offer their units as rentals. And nothing’s really looking promising on the employment growth front, either.No wonder developers aren’t optimistic enough to kick-start new apartment projects today. Either they’re being uncharacteristically patient (and if so, how long before they fall off the wagon and start building?) or they’ve been taken by body snatchers.[IMGCAP(1)]I think either scenario is pretty interesting.