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Confidence for the new multifamily housing market remained in negative territory during the fourth quarter, according to the National Association of Home Builders’ (NAHB) quarterly Multifamily Market Survey.

When asked to compare current market conditions in their areas with three months earlier, 23% of builder and developer respondents said they are worse, while 63% said they are about the same. The remaining 14% reported conditions are better.

For the fourth quarter, the Multifamily Production Index (MPI) had a reading of 41, while the Multifamily Occupancy Index (MOI) came in at 77.

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 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.

“An MPI below 50 at the end of 2023 is consistent with the weakness in multifamily starts the Census Bureau reported in January,” said NAHB chief economist Robert Dietz. “NAHB projects that multifamily production will be down in 2024, as the number of apartments currently under construction is near its highest level since 1973.”

Component readings for the fourth quarter included:

  • Garden/low-rise units at 51;
  • Mid/high-rise units at 26;
  • Subsidized housing at 41; and
  • Build-for-sale units at 43.

“Tight lending standards and the high cost of development loans continue to impede the financing of new multifamily projects,” said Lance Swank, president and CEO of Sterling Group and chairman of NAHB’s Multifamily Council. “Developers in many parts of the country have also become cautious as they see a substantial number of new apartments being delivered and more that are ready to come online.”

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 MOI is a weighted average of the garden/low-rise, mid/high-rise, and subsidized segments.

Readings for the fourth quarter, which again saw sentiment about occupancy in mid/high-rise apartments weaker than other segments, included:

  • Garden/low-rise units at 80;
  • Mid/high-rise units at 64; and
  • Subsidized housing at 88.

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