According to the latest Multifamily Market Survey by the National Association of Home Builders, builder confidence in the market for new multifamily housing was in positive territory for the second quarter. The MMS produces two separate indices. The Multifamily Production Index (MPI) had a reading of 56 for the second quarter while the Multifamily Occupancy Index (MOI) reading was 89.
The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise and subsidized) and the built-for-sale (or condominium) market. The survey asks multifamily builders to rate the current conditions as "good," "fair" or "poor" for multifamily starts in markets where they are active. For the second quarter, the component measuring garden/low-rise units had a reading of 64, the component measuring mid/high-rise units had a reading of 47, the component measuring subsidized units had a reading of 55 and the component measuring built-for-sale units had a reading of 45.
The MOI measures the multifamily housing industry's perception of occupancies in existing apartments on a scale of 0 to 100. The index and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it is poor.
The MOI is a weighted average of three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized). The survey asks multifamily builders to rate the current conditions for occupancy of existing rental apartments in markets where they are active as "good," "fair" or "poor." For the second quarter, the component measuring garden/low-rise units had a reading of 91, the component measuring mid/high-rise units had a reading of 83 and the component measuring subsidized units had a reading of 91.
NAHB redesigned the MMS in the first quarter of 2023 to make it easier to interpret and more similar to the NAHB/Wells Fargo Housing Market Index for single-family housing. Because the previous version of the MMS series can no longer be used to compare with this quarter's results, the redesigned tool asked builders and developers to compare current market conditions in their areas to three months earlier, using a "better," "about the same" or "worse" scale. Seventy percent of respondents said the market is "about the same" as it was three months earlier.
"Multifamily housing demand remains solid, however, there are headwinds limiting new development in many parts of the country," said Lance Swank, chairman of NAHB's Multifamily Council. "Reduced availability of credit for new construction, problems getting projects approved and significant increases in operating expenses are hampering new multifamily development. Property, casualty and liability insurance has emerged as a major issue facing the multifamily industry, further constraining new supply."
"Demand for multifamily housing is being supported by the low availability and high cost of single-family homes on the market, although multifamily development faces many of the same supply-side challenges as single-family," said NAHB Chief Economist Robert Dietz. "On balance, we forecast that multifamily starts will decline during the second half of 2023 due to tight financing conditions and local concerns over supply."