
Confidence in the market for new multifamily housing dropped in the second quarter, according to the National Association of Home Builders’ (NAHBs’) Multifamily Market Survey. The Multifamily Production Index (MPI) decreased 3 points to 48 compared with the first quarter.
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.
“Demand for new rental housing remains strong, but headwinds that have emerged in some parts of the country are slowing production of new apartments,” said Justin MacDonald, president and CEO of The MacDonald Cos. and chairman of NAHB’s Multifamily Council. “The moratorium on evictions is making it difficult to obtain financing in places where rental assistance is inadequate to offset the moratorium. In other places, local governments imposing new regulations and switching to virtual meetings are making it take longer to obtain approvals.”
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. The component measuring low-rent units increased 3 points to 49, the component measuring market-rate units dropped 3 points to 51, and the component measuring for-sale units posted a 7-point drop to 45.
“The MPI softened slightly in the second quarter while multifamily production continued to increase, but it is typical for the MPI to turn one to three quarters before starts,” said NAHB economist Robert Dietz. “Nevertheless, the MPI remains as strong as it was at any point in 2020, and NAHB expects more apartments to be started in 2021 than in 2019 or 2020.”
The Multifamily Occupancy Index (MOI) rose 6 points to 70, the highest reading since the start of the series. 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.