The National Association of Home Builder’s Multifamily Production Index (MPI) increased one point to a level of 55 for the second quarter. This is the 14th consecutive quarter with a reading of 50 or above.
The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The index and all its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.
The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. The MPI component tracking low-rent units stayed steady at 54, while market-rate rental units increased one point to 60 and for-sale units rose three points to 53.
“The multifamily market continues to perform quite well, and we expect that trend to continue,” said W. Dean Henry, CEO of Legacy Partners Residential in Foster City, Calif., and chairman of NAHB’s Multifamily Leadership Board. “The market is benefitting from new household formations. As these households are formed, many are choosing to live in apartments or condos.”
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, dropped two points to 34, with lower numbers indicating fewer vacancies. This is the lowest reading since the fourth quarter of 2012.
“The MVI has shown three straight quarters of declines and the Census’ vacancy rate is the lowest it has been since 1984,” said NAHB Chief Economist David Crowe. “These are very good indicators of the overall health of the multifamily market. However, developers in certain parts of the country are experiencing lot and labor shortages, which can hinder production.”
Historically, the MPI and MVI have performed well as leading indicators of 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 nahb.org/mms.