Confidence in the marketplace for new multifamily housing weakened slightly in the third quarter, based on results in the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two distinct indices. The Multifamily Production Index (MPI) dropped seven points to 49 compared to the preceding quarter. Meanwhile, the Multifamily Vacancy Index (MVI) remained at 40, with lower numbers indicating fewer deductions.
The MPI steps builder and builder sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The indicator and all of its components are scaled so that a number below 50 indicates that more respondents report states are getting 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 low-income tax credits or other government subsidy programs; market-rate rental units–flats that are designed to be rented at the price that the market will hold; and for-sale units–condos. The component measuring low-rent units dropped five points to 51, the component measuring market rate rental units dropped 20 points to 44 and the component measuring for-sale units stayed at 50.
The MVI steps the multifamily housing industry’s perception of vacancies in existing flats. It’s a weighted average of current occupancy indicators for class A, B, and C multifamily units, and may vary from 0 to 100, where a number under 50 suggests more property managers think deductions are falling than increasing. Having a reading of 40, the MVI remained unchanged in the preceding quarter.
“The general multifamily market remains strong, but programmers are moving forward carefully to handle inventory and keep it in pace with customer demand,” said Gary Campbell, CEO of Gilbert G. Campbell Real Estate in Lowell, Mass., and chairman of NAHB’s Multifamily Council.
“The small decrease in the MPI is to be expected as multifamily starts were comparatively high in the second quarter,” said NAHB Chief Economist Robert Dietz. “The equilibrium of the MVI is also consistent with the Census Bureau’s five-plus vacancy rate, which has moved very little in the past six months.”
Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on probable movement in the Census figures one to three quarters in advance.
For information tables on the MPI and MVI, see www.nahb.org/mms.
To learn more on the NAHB Multifamily program, please see NAHB Multifamily: https://www.nahb.org/en/members/committees-and-councils/councils/multifamily-council/nahb-multifamily.aspx.