New Multifamily Survey Finds Conditions Have Stabilized

Two-thirds of respondents to a newly formulated survey by the National Association of Home Builders said current market conditions for multifamily housing in their markets were “about the same” as it was three months earlier.

The new Multifamily Production Index (MPI) in Q1 2023 also gave respondents the choice of “better” or “worse.”

NAHB’s current forecast has multifamily starts declining by more than 10% per year in 2023 and 2024, according to NAHB Chief Economist Robert Dietz.

He said multifamily builders indicate that it has become more difficult to obtain loans for multifamily development “as a result of tightening financial conditions due to actions of the Federal Reserve, which reduce future apartment construction,” said the survey.

Higher interest rates and increased construction costs are negatively impacting projects in certain parts of the country, the survey found.

Garden/low-rise units had the strongest production index of all four sectors covered in the survey. Occupancy in subsidized units was strongest.

The new survey is similar to the NAHB/Wells Fargo Housing Market Index for single-family housing.

The MPI measures builder and developer sentiment about current production conditions in the apartment and condo market on a scale of 0 to 100. The index and all its components are scaled so that a number above 50 indicates that more respondents report conditions that are good than report conditions that are poor.

The MPI’s first reading was 50, asking respondents to rate categories as “good,” “fair,” or “poor.”

In Q1, the component measuring garden/low-rise units had a reading of 57, the component measuring mid/high-rise units had a reading of 41, the component measuring subsidized units had a reading of 51 and the component measuring built-for-sale units had a reading of 42.

NAHB also is producing a new Multifamily Occupancy Index (MOI).

The MOI measures the multifamily housing industry’s perception of occupancies in existing apartments on a scale of 0 to 100. The index and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it is poor.

Its reading was 82.

The new MOI is a weighted average of three built-for-rent market segments (garden/low-rise, mid/high-rise, and subsidized). The survey asks multifamily builders to rate the current conditions for occupancy of existing rental apartments in markets where they are active as “good,” “fair” or “poor.”

For the first quarter, the component measuring garden/low-rise units had a reading of 84, the component measuring mid/high-rise units had a reading of 74 and the component measuring subsidized units had a reading of 87.