Multifamily Confidence in Occupancies Reaches Record High

The confidence of the multifamily housing industry in production and occupancy is gaining, reports the National Association of Home Builders.

The Multifamily Production Index increased five points to 53 compared to the previous quarter while the Multifamily Occupancy Index increased by five points, up to 75—the highest reading since the inception of the index in 2003.

MPI measures builder and developer sentiment about current conditions in the apartment and condo market. MOI measures the multifamily housing industry’s perception of occupancies in existing apartments.

NAHB’s Multifamily Council Chairman Justin MacDonald said the increases are indicative of the strong demand and limited inventory of all types of housing which are keeping occupancy strong in multifamily properties across the country.

“We have seen robust production of new multifamily properties, although developers continue to deal with very significant supply-side challenges, like finding enough labor, materials and land to build on,” said McDonald, president and CEO of The MacDonald Companies in Kerrville, Texas.

NAHB Chief Economist Robert Dietz called the record in occupancy confidence consistent with the strong multifamily occupancy rates reported by the Census Bureau, which are now higher than they’ve been since the 1980s.

Speaking about the rise in the production in index above 50, he said the figure is in line with multifamily housing starts, which have been running at a 460,000-plus annualized rate through the first three quarters of 2021.

Dietz forecasted this year will be the strongest year for multifamily production since the tax policy-driven surge of the 1980s with housing demand rising in higher density markets.

At the same time, multifamily builders are being beset by rising commodity prices which are expected to continue.

“The biggest driver of wood usage and housing and demand for multifamily has to do with the demographics in the US right now,” Joe Sanderson, managing director and chief executive officer of natural resources for Domain Timber Advisors, told GlobeSt.com in a recent interview. “The millennial generation is becoming a home-buying age, which happens around the average age of 33.”

“You’ll see lumber prices will go from $400 per thousand board feet to maybe $650, maybe $700 per thousand,” Sanderson adds. That will go through the end of this year into the early or middle part of 2022.