Builder and developer confidence for new multifamily housing dipped in the second quarter according to a new survey by the National Association of Home Builders.
The Multifamily Production Index, which measures builder and developer sentiment about current conditions in the apartment and condo market, dropped three points to 48 compared to the previous quarter. The trade group explained a number below 50 indicates that more respondents report conditions are getting worse than report conditions are improving.
“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.”
In an encouraging move for new construction the Multifamily Occupancy Index, which tallies the multifamily housing industry’s perception of occupancies in existing apartments increased six points to 70.
Headwinds
Looking at these numbers, the chairman of NAHB’s Multifamily Council Justin MacDonald asserted demand for rental housing remains strong, but headwinds that have emerged in some parts of the country are slowing production of new apartments.
One headwind he pointed to is the moratorium on evictions which is making it difficult to obtain financing in places where rental assistance is inadequate to offset the moratorium.
In other places, he said local governments are making it take longer to obtain approvals by imposing new regulations and switching to virtual meetings.
Still, it is clear that a good amount of supply is in the pipeline. More than 330,000 new rental units are expected to be delivered coast to coast by year’s end, according to Yardi Matrix, which is just a 2.5% decrease in new units over 2020 figures. That’s a decent pace under the circumstances, according to Yardi’s Doug Ressler.
“The pandemic shifts and resurgence of the residential rental market bring new residential supply into focus,” Ressler told RentCafe in an interview. “Lack of entry-level housing supply and rising home prices will show the multifamily rental market demand increasing as new renters enter the market and Millennials extend their rental commitments.”