Confidence in the market for new multifamily housing produced mixed results year over year in the fourth quarter of 2024, according to the Multifamily Market Survey (MMS) from the National Association of Home Builders (NAHB).
The MMS produces two separate indices. Although the Multifamily Production Index (MPI) increased seven points to 48 year over year, it is still below the break-even point of 50. The MPI measures builder and developer sentiment about current production conditions in the apartment and condo market on a scale of 0 to 100.
“A MPI below 50 is what we would expect given that multifamily starts declined in both 2023 and 2024,” says NAHB chief economist Robert Dietz. “We are projecting that multifamily construction will decline again in the first half of 2025 before stabilizing toward the end of the year, with the industry supported by a low national unemployment rate.”
The MPI is a weighted average of four key market segments including three in the built-for-rent market (garden/low-rise, mid/high-rise, and subsidized) and one in the built-for-sale (or condominium) market.
Three of the four components increased year over year. The component measuring garden/low-rise increased one point to 52; the component measuring mid/high-rise units increased 13 points to 39; the component measuring subsidized units rose 11 points to 52; and the component measuring built-for-sale units posted a one-point decline to 42.
The second of the two indices, the Multifamily Occupancy Index (MOI), which measures the industry’s perception of occupancies in existing apartments, had a reading of 81, an increase of four points year over year. The reading at 81 indicates a positive perception surrounding occupancy.
All three components of the MOI, which include garden/low-rise, mid/high-rise, and subsidized, remain solidly in positive territory above 50. The component measuring garden/low-rise units increased one point to 81; the component measuring mid/high-rise units rose 10 points to 74; and the component measuring subsidized units posted a three-point increase to 91.
“Multifamily developers are slightly less pessimistic than they were at this time last year, but supply-chain problems and high interest rates remain serious barriers to a stronger market,” says Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council. “Occupancy rates for owners of rental properties have remained solid, although they are struggling with high operating costs.”
