A lot has happened since 2005. The multifamily market (like the economy) crested and crashed. But, at least one significant index says optimism is approaching the highs of seven years ago. The recent Multifamily Production Index (MPI), which the National Association of Home Builders (NAHB) bills as “a leading indicator for the multifamily market," recorded its highest reading since the third quarter of 2005 with an index level of 51.
According to the NAHB: “The MPI, which measures builder and developer sentiment about current conditions in the multifamily market on a scale of 0 to 100, rose from 49 in the fourth quarter to 51 in the first quarter.” The association said that this is the seventh consecutive quarter that the index has increased. The index looks at three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and "for-sale" units, or condominiums. A rating of over 50 means that things are improving.
Sentiment is nice, but that doesn’t mean starts are going to hit 2005-levels anytime soon. In NAHB's Spring Construction Forecast, David Crowe, the association's chief economist and senior vice president, projected 216,000 new starts by year’s end and another 235,000 in 2013. While that lags the 352,000 multifamily units produced in 2005, it’s certainly a step in the right direction after record low production years in 2009 and 2010.
How do you feel? Are you as optimistic about starting new multifamily projects as you were in 2005?