Confidence in the market for new multifamily housing inched up in the fourth quarter, according to the National Association of Home Builders’ (NAHB’s) Multifamily Market Survey. The Multifamily Production Index (MPI) increased one point to 54 compared with the third 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.
“Multifamily developers remain largely optimistic about this segment of the market,” said Sean Kelly, executive vice president of LNWA in Wilmington, Delaware. “Demand in many parts of the country has been strong enough to compensate for the rising costs of land, labor, and materials.”
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 decreased seven points to 48, the component measuring market-rate units increased one point to 61, and the component measuring for-sale units posted a six-point gain to 53.
The Multifamily Occupancy Index (MOI) decreased six points to 69, although it remains as high as it has been any time prior to the second quarter of 2021. 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.
“The strength of the MPI is consistent with census production statistics, which show 750,000 apartments under construction and new apartments being started at a rate in excess of 500,000 per year,” said NAHB chief economist Robert Dietz. “The modest decline in the very strong MOI number is not likely to result in any significant change in census rental occupancy rates, which are still rising and will likely remain high given the strong 69 index number from our survey.”