Multifamily developer confidence continued to take a hit year over year in the second quarter, according to the National Association of Home Builders’ (NAHB’s) Multifamily Market Survey. The Multifamily Production Index (MPI) had a reading of 44, down 12 points year over year, while the Multifamily Occupancy Index (MOI), at 81, was down eight points year over year.
The MPI measures builder and developer sentiment about conditions in the apartment and condo market on a scale of 0 to 100. According to the NAHB, the index and all of its components are scaled so that a number below 50 indicates more respondents are reporting that conditions are getting worse rather than improving.
“Multifamily developers are less optimistic than they were at this time last year,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Housing Council. “Some are struggling with particular local regulations, but the main reason it’s difficult to get projects started is high interest rates.”
NAHB chief economist Robert Dietz concurred that interest rates and limited financing availability have continued to make multifamily development more difficult, but there might be some relief ahead.
“Financial markets may become more stable later in the year, as recent weak economic data make it more likely the Fed will cut interest rates,” he noted.
The MPI is a weighted average of four key market segments: three in the build-to-rent market—garden/low-rise, mid/high-rise, and subsidized—and the build-for-sale, or condo, units. All four posted year-over-year declines.
- Garden/low-rise: Decreased 11 points to 53;
- Mid/high-rise: Decreased 18 points to 29;
- Subsidized: Decreased four points to 51; and
- Build-for-sale: Decreased seven points to 38.
The MOI’s reading of 81 indicates apartment owners are positive about occupancy. The MOI measures the multifamily industry’s perception of occupancies in existing apartments. It is a weighted average of current occupancy indexes for garden/low-rise, mid/high-rise, and subsidized and can vary from 0 to 100, with a break-even point at 50, where higher numbers indicate occupancy is good. Year over year, all components saw decreases. The garden/low-rise component fell nine points to 82, the mid/high-rise component dropped seven points to 76, and the component for subsidized units was down six points to 85.
