Multi-family market conditions improve in Q3
Washington DC – Confidence in the new multi-family home market improved in the third quarter, according to the results of the Multi-family Market Survey (MMS) released today by the National Association of Home Builders (NAHB).
“Strong demand and limited inventory of all types of homes means multi-family occupancy rates across the country remain strong,” said Justin MacDonald, president and CEO of The MacDonald Companies, Kerrville, Texas, and chairman of NAHB’s Multi-family council. “For the same reason, we have seen robust production of new multi-family homes, although developers still face very significant supply-side challenges such as finding enough labour, materials and land to build on.”
The MMS produces two separate indices: the Multi-family Production Index (MPI) rose five points to 53 compared to the previous quarter; the Multi-family Occupancy Index (MOI) also rose five points, to 75 – the highest value since the index’s inception in 2003. The MPI measures builders’ and developers’ sentiment about current conditions in the condo and condo market on a scale from 0 to 100. (Any number above 50 indicates that more respondents report that the condition is improving than the condition is getting worse.)
The MPI is a weighted average of three core elements of that particular housing market: construction of low-cost rental apartments supported by low-income rebates or other government subsidy programs; market-based rental units – apartments built to be rented out at the price the market will hold; and units for sale such as condominiums. According to NAHB, all three components increased from the second to the third quarter. The component measuring cheap rental units increased six points to 55, the component measuring market rental units increased nine points to 60 and the component measuring units for sale gained two points to 47.
The MOI measures the perception of the multi-family housing about the occupancy of existing apartments. It is a weighted average of current occupancy indices for Class A, B and C multi-family dwellings and can range from 0 to 100, with a break-even point at 50, where higher numbers indicate increased occupancy. With a moment of inertia of 75, this is the highest value since the beginning of the series.
According to NAHB, the record level MOI matches the multi-family occupancy rates reported by the Census Bureau. “An MPI above 50 is equivalent to starting multi-family housing, which grew by more than 460,000 year-on-year in the first three quarters of 2021,” said Robert Dietz, chief economist at NAHB. “That should make 2021 the strongest year for multi-family production we’ve seen since the tax-policy-driven wave of the 1980s. As the economy continues to reopen, demand for housing in higher-density markets is rising, supporting both multi-family occupancy and production.”