Multifamily developer confidence showed mixed results for the third quarter, according to the National Association of Home Builders’ (NAHB’s) Multifamily Market Survey. The Multifamily Production Index (MPI) had a reading of 40, up two points year over year, while the Multifamily Occupancy Index (MOI), at 75, was down seven 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.
“The relatively pessimistic MPI of 40 is consistent with multifamily construction starts that have declined from annualized rates above 450,000 from 2021 through mid-2023, to under 350,000 as of September,” said NAHB chief economist Robert Dietz. “We expect multifamily construction to remain weak for another year as the market works through a substantial number of units under construction, before beginning to move back to long-term trends toward the end of 2025.”
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 were below the break-even point.
- Garden/low-rise: Increased three points to 48;
- Mid/high-rise: Remained even at 28;
- Subsidized: Increased seven points to 46; and
- Build-for-sale: Decreased three points to 29.
The MOI’s reading of 75 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 garden/low-rise component fell seven points to 77, the mid/high-rise component dropped eight points to 66, and the component for subsidized units was down three points to 86.
“Demand for rental apartments remains strong enough to support relatively high occupancy rates in existing projects,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Housing Council. “However, construction costs, the cost and access to financing, and the availability of land and regulations remain significant obstacles to new multifamily development.”
