Multifamily Developers Become More Pessimistic in Q2

Multifamily homebuilders have reported a more gloomy view of the state of the industry in the second quarter of 2024 than in the same period of 2023 and the first three months of this year. The findings of a member survey by the National Association of Home Builders (NAHB) reflect declining confidence in both current production conditions and occupancy, as measured by NAHB indices.

The Multifamily Production Index (MPI) measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0-100. A score below 50 indicates that more respondents see conditions as poor than as positive. The Multifamily Occupancy Index (MOI) similarly measures member opinions on occupancy.

In 2Q 2024 the MPI achieved a score of just 44 – down 12 points year-over-year, and three points below 1Q 2024. The MOI fared better, but its positive score of 81 was eight points lower than the prior year and two points below the first quarter – though it was an improvement over the score of 77 recorded in 4Q 2023.

Asked how market conditions have changed, 12% of respondents in the survey said they were better, 63% said they remained the same, and 26% said they were worse.

Scores for all components of the MPI – garden/low-rise, mid/high rise, subsidized, and built for sale were lower than in the first quarter. However, the segment of production most affected was mid/high rise where the index dropped from 36 to 29, while other components each fell by just one point.

In contrast, occupancy of mid/high rise apartments rose two points to a score of 76 between the first and second quarters, while occupancy in other categories fell in the same period.

“Some [multifamily developers] are struggling with particular local regulations, but the main reason it’s difficult to get projects started is high interest rates,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council.