The National Association of Home Builders (NAHB) has revamped its quarterly Multifamily Market Survey to make it easier to interpret and more comparable to the single-family NAHB/Wells Fargo Housing Market Index.
For the first quarter, the Multifamily Production Index (MPI) had a reading of 50, while the Multifamily Occupancy Index (MOI) came in at 82.
According to the NAHB, the MPI measures builder and developer sentiment about current apartment and condo production conditions on a scale of 0 to 100, with a number above 50 indicating that more respondents report conditions are good rather than poor.
The updated MPI takes the weighted average of four key market segments: three in the build-for-rent market—garden/low-rise, mid/high-rise, and subsidized—and the build-for-sale, or condo, market.
Component readings for the first quarter included:
- Garden/low-rise units at 57;
- Mid/high-rise units at 41;
- Subsidized housing at 51; and
- Build-for-sale units at 42.
“NAHB’s current forecast has multifamily starts declining by more than 10% per year in 2023 and 2024,” said NAHB chief economist Rob Dietz. “Commentary from multifamily builders indicates that it has become more difficult to obtain loans for multifamily development as a result of tightening financial conditions due to actions of the Federal Reserve, which reduce future apartment construction.”
The MOI measures the multifamily industry’s perception of occupancies in existing apartments on a scale of 0 to 100, with a number above 50 indicating more respondents report that occupancy is good rather than poor.
The updated MOI is a weighted average of the garden/low-rise, mid/high-rise, and subsidized segments.
Readings for the first quarter, which were significantly over the midpoint level, included:
- Garden/low-rise units at 84;
- Mid/high-rise units at 74; and
- Subsidized housing at 87.
The redesigned survey also asked builders and developers to compare current market conditions in their areas with the prior three-month period. Over two-thirds, 67%, said the market is about the same as it was three months earlier.
“Garden/low-rise units had the strongest production index of all four sectors covered in the survey, while subsidized units had the strongest occupancy index,” said Lance Swank, president and co-owner of Sterling Group and chairman of NAHB’s Multifamily Council. “However, higher interest rates and increased construction costs are negatively impacting projects in certain parts of the country.”