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

For the third quarter, the Multifamily Production Index (MPI) had a reading of 38, 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 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 third quarter included:

  • Garden/low-rise units at 45;
  • Mid/high-rise units at 28;
  • Subsidized housing at 39; and
  • Build-for-sale units at 32.

“The relatively weak MPI is consistent with the declining production levels seen in the second half of 2023 and the NAHB’s projection that they will be lower still in 2024,” said NAHB chief economist Robert Dietz. “Surveys by both NAHB and the Fed indicate that cost and availability of credit for builders and developers has become a major headwind for new 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 MOI is a weighted average of the garden/low-rise, mid/high-rise, and subsidized segments.

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

  • Garden/low-rise units at 84;
  • Mid/high-rise units at 74; and
  • Subsidized housing at 89.

“High operating costs are creating problems for existing properties, especially affordable properties, and the cost and reduced availability of credit is making it difficult to finance new projects,” said Lance Swank, president and co-owner of Sterling Group and chairman of NAHB’s Multifamily Council. “It should also be noted that the garden/low-rise market is doing much better than the mid/high-rise market, both in terms of construction and occupancy rates.”