Confidence from the marketplace for new multifamily housing enhanced from the second quarter of 2019, based on results in the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS generates two individual indices. The Multifamily Production Index (MPI) increased 16 factors to 56 in comparison to the preceding quarter. Meanwhile, that the Multifamily Vacancy Index (MVI) dropped eight points to 40, with lesser numbers indicating fewer exemptions.

The MPI steps builder and builder sentiment about present conditions at the apartment and condominium marketplace on a scale of 0 to 100. The indicator and all its components are scaled so that a number under 50 suggests that economists report states are becoming worse compared to report states are improving.

The MPI is a weighted average of three important elements of the multifamily housing market: structure of low-rent units–flats that are encouraged by non invasive tax credits or other government subsidy applications; market-rate leasing units–flats that are designed to be rented in the price that the market will hold; and for-sale units–condos. All three components posted earnings in the next quarter: The component measuring low-rent units raised nine factors to 56, the component measuring market rate rental jumped 22 factors into 64 along with also the component measuring for-sale units climbed 19 points into 50.

The MVI steps the multifamily housing industry’s perception of vacancies in existing flats. It is a weighted average of current occupancy indicators for class A, B, and C units, and may vary from 0 100, in which a number under 50 suggests more land managers think deductions are falling than increasing. With a reading of 40, this really is the lowest reading since the second quarter of 2017.

“Overall, builders and developers are reporting increased confidence in the multifamily housing market,” stated Gary Campbell, CEO of Gilbert G. Campbell Real Estate at Lowell, Mass. , also chairman of NAHB’s Multifamily Council. “However, they still have to deal with the high cost of land, labor and regulation, which could impact future production.”

“Historically, the MPI and MVI tend to move one to three months ahead of U.S. Census figures for multifamily starts and vacancy rates, but in the second quarter we saw positive gains in both the NAHB and Census measures at the same time,” stated NAHB Chief Economist Robert Dietz. “This is a sign of solid demand for multifamily housing in the second quarter, which was supported by low unemployment and a healthy number of household formations.”

For information tables around the MPI and MVI, see www.nahb.org/mms.

For more info about the NAHB Multifamily program, please see NAHB Multifamily: https://www.nahb.org/en/members/committees-and-councils/councils/multifamily-council/nahb-multifamily.aspx.

Jeff Thornton