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Multifamily Builder and Developer Confidence Edged Down Slightly in Second Quarter

In this recent press release from the National Association of Home Builders (NAHB) builder confidence dropped slightly in the second quarter. Due to a variety of causes such as neighborhood opposition and regulatory burdens - projects are struggling to get started however demand remains high. Continue reading below the full article.

Multifamily Builder and Developer Confidence Edged Down Slightly in Second Quarter

Confidence in the multifamily housing market edged down in the second quarter of 2018, according to the Multifamily Production Index (MPI) released today by the National Association of Home Builders (NAHB). The MPI dipped two points to 51 compared to the previous quarter.

The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. The index and all of its components are scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

The MPI is a weighted average of three key elements of the multifamily housing market: construction of low-rent units—apartments that are supported by low-income tax credits or other government subsidy programs; market-rate rental units—apartments that are built to be rented at the price the market will hold; and for-sale units—condominiums. The component measuring low-rent units rose three points to 57, while the component measuring market rate rental units fell six points to 50 and the component measuring for-sale units dropped three points to 46.

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, rose three points to 45. The MVI is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, where any number over 50 indicates more property managers report more vacant apartments. Although the MPI increased in the second quarter, a reading of 45 is still seen as a healthy number for the multifamily market.

“Multifamily builders and developers are seeing strong demand, but there are headwinds that have impacted further development,” said Steve Lawson, president of The Lawson Companies in Virginia Beach, Va., and chairman of NAHB’s Multifamily Council. “Some developers have had difficulty getting projects off the ground due to regulatory burdens and neighborhood opposition in certain parts of the country.”

“Although the MPI is down two points in the second quarter, it is still above 50, reflecting a solid number of multifamily starts so far this year,” said NAHB Chief Economist Robert Dietz. “In addition to regulatory costs, developers still need to monitor the impact of tariffs and the threat of further trade restrictions on building materials prices, especially lumber.”

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 likely movement in the Census figures one to three quarters in advance.

For data tables on the MPI and MVI, visit www.nahb.org/mms.

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