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According to the National Association of Home Builders’ (NAHBs’) Multifamily Market Survey, confidence in the market for new multifamily housing increased in the first quarter. The Multifamily Production Index (MPI) rose 8 points to 51 compared with the previous quarter—the first time the index has been over 50 in seven quarters.

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 above 50 indicates more respondents are reporting that conditions are improving than getting worse.

The MPI is a weighted average of three key multifamily market elements: construction of low-rent units—apartments that are supported by low-income housing tax credits or other government subsidized programs; market-rate rental units; and for-sale units. All three saw increases in the first quarter, with the component measuring low-rent units increasing 4 points to 46, the component measuring market-rate units rising 6 points to 54, and the component measuring for-sale units posting a 13-point gain to 52.

“The MPI reversed trend and rose strongly in the second quarter of last year, one quarter before a similar turnaround in the multifamily housing starts data,” said NAHB economist Robert Dietz. “Since then, multifamily starts have mirrored the MPI. The surge that we saw in the MPI for the first quarter of 2021 coincides with a similar surge in multifamily starts to a seasonally adjusted annual rate of more than 450,000 units. Based on these recent numbers, NAHB now expects a gain in multifamily starts this year.”

The Multifamily Occupancy Index (MOI) increased 1 point to 59, improving over the past three quarters. New this quarter, the MOI replaces the former Multifamily Vacancy Index and is based on the same underlying data. The MOI measures the multifamily industry’s perception of occupancies in existing apartments. It is a weighted average of current occupancy indexes for Class A, B, and C units and can vary from 0 to 100, with a break-even point at 50, where higher numbers indicate increased occupancy.

“We continue to see strong demand for rental housing, especially in the suburbs,” said Justin MacDonald, president and CEO of The MacDonald Cos., based in Kerrville, Texas, and chairman of the NAHB Multifamily Council. “But an increase in building material prices and difficulties obtaining approvals remain significant headwinds for the industry.”