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.
The Multifamily Production Index (MPI), a leading indicator for the multifamily market, released by the National Association of Home Builders (NAHB) today showed continued improvement for the fifth consecutive quarter for the apartment and condominium housing market.
The MPI, which tracks the sentiment of builders and developers about the conditions of the multifamily market on a scale of 0 to 100, increased from 44.4 in the second quarter to 47.3 in the third quarter—the highest reading since the fourth quarter of 2005.
The index 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 index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. In the third quarter of 2011, the MPI component tracking builder and developer perceptions of market-rate rental properties recorded an all-time high of 63.8, while low-rent units remained steady at 50.1. For-sale units rose to 31.9, the highest recording since the second quarter of 2006.
“Multifamily construction continues to be the bright spot in the overall housing market,” said NAHB Chief Economist David Crowe. “While household formations have been below trend, those who are forming new households are becoming renters and this trend is likely to continue until consumers’ confidence returns.”
“Apartments and condominiums play an integral role in the overall housing market, now more than ever,” said Stillman Knight, chairman of NAHB’s Multifamily Council Board of Trustees and president and CEO of the Knight Company of Alexandria, Va. “The construction of these units not only brings jobs to local communities, but also provides an adequate stock of housing for areas with rapid population growth.”
Looking forward to the next six months, builder and developer expectations improved in the third quarter for market-rate rental properties and for-sale properties, up to 67.2 and 37.3, respectively. Expectations for low-rent units decreased slightly, to 50.2.
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, decreased from 36.1 in the second quarter to 35.1 in the third quarter. With the MVI, lower numbers indicate fewer vacancies. The MVI has improved considerably since reaching a peak of 70.2 in the second quarter of 2009.
“NAHB’s Multifamily Production Index and Multifamily Vacancy Index have emerged as leading indicators for the multifamily market,” Crowe said. “For example, the MVI began to improve strongly in the third quarter of 2009, one quarter before a similar trend emerged in the Census Bureau’s rental vacancy rate for buildings with at least five apartments. Although the Census shows a slight surge in rental vacancy rates in the latest quarter, our survey suggests that this will only be a temporary setback.”
For data tables on the MPI and MVI, visit www.nahb.org/mms.