Multifamily developer confidence declined year over year in the first quarter, according to the National Association of Home Builders’ (NAHB’s) Multifamily Market Survey. The Multifamily Production Index (MPI) decreased three points to 47 in the first quarter, while the Multifamily Occupancy Index (MOI) rose one point to 83.
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 concerned about higher interest rates for construction and development loans and tighter lending conditions that are taking place in the market right now,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council. “There are also many areas across the country where developers are having a difficult time getting their projects approved.”
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 two points to 55;
- Mid/high-rise: Decreased five points to 36;
- Subsidized: Decreased one point to 50; and
- Build-for-sale: Decreased three points to 39.
The MOI’s reading of 83 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. The components for garden/low-rise and mid/high-rise remained unchanged year over year, with readings of 84 and 74, respectively. The component for subsidized units increased seven points to 94.
“Owners of existing apartments continue to report strong occupancy, but this has the potential to soften when more of the 900,000-plus apartments currently under construction come online,” said NAHB chief economist Robert Dietz. “NAHB is currently projecting that multifamily starts will fall 28% this year as developer activity slows.”
