Multifamily Builder and Developer Confidence Weakened in First Quarter

Confidence in the market for new multifamily housing has weakened significantly, according to NAHB's Multifamily Market Survey.

The National Association of Home Builders (NAHB) has released the results from the latest Multifamily Market Survey conducted during the first part of April. It indicates confidence in the market for new multifamily housing weakened significantly in the first quarter of 2020.

The survey produces two separate indices, the Multifamily Production Index (MPI) and the Multifamily Vacancy Index (MVI). The MPI fell 22 points to 27, which is the lowest reading since the fourth quarter of 2009, while the MVI rose 19 points to 59, with higher numbers indicating more vacancies.

The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. A number below 50 indicates that more respondents report conditions are getting worse than report conditions are improving.

The MVI measures the multifamily housing industry’s perception of vacancies in existing apartments. It is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, where a number over 50 indicates more property managers believe vacancies are increasing than decreasing. With a reading of 59, this is the highest reading since the fourth quarter of 2009.

“Leading up to the coronavirus pandemic, demand for apartments had been solid and development processes were normal,” said Barry Kahn, president of Hettig-Kahn Holdings in Houston and chairman of NAHB’s Multifamily Council. “Now, we are seeing a lot of disruption in the market as builders and developers are trying to navigate the impacts on operations and collections, permitting, inspections and financing.”