Multifamily construction sentiment falls in Q2
Washington, DC – Confidence in the new multifamily home market declined in the second quarter, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two separate indices. The Multifamily Production Index (MPI) fell three points to 48 from the previous quarter. Meanwhile, the Multifamily Occupancy Index (MOI) rose six points to 70.
The MPI measures the sentiment of builders and developers about current conditions in the condo and condo market on a scale of 0 to 100. The index and all its components are scaled so that a number below 50 indicates that more respondents report that conditions getting worse than reporting conditions are improving.
The MPI is a weighted average of three core elements of the multi-family housing market:
- Construction of low-cost rental housing/apartments supported by low-income tax credits or other government subsidy programs.
- Market-based rental units/apartments built to be rented out at the market price.
- Units/apartments for sale.
The component measuring cheap rental units increased three points to 49, the component measuring market rental units fell three points to 51 and the component measuring units for sale fell seven points to 45.
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, with higher numbers indicating increased occupancy. With a moment of inertia of 70, this is the highest value since the beginning of the series.
“Demand for rental housing remains strong, but headwinds that have emerged in some parts of the country are holding back new apartment production,” said Justin MacDonald, president and CEO of The MacDonald Companies in Kerrville, Texas, and chairman of NAHB’s Multifamily. council. “The moratorium on evictions makes it difficult to get financing in places where housing benefits are insufficient to compensate for the moratorium. In other places, local governments enforcing new regulations and switching to virtual meetings are taking longer to get approvals.”
NAHB economist, Robert Dietz, added: “The MPI softened slightly in the second quarter as multi-family production continued to increase, but it is typical for the MPI to spin one to three quarters before starting. Nevertheless, the MPI remains that way. strong as it ever was in 2020, and NAHB expects more apartments to start in 2021 than in 2019 or 2020.”