In the fourth quarter of 2011, NAHB’s Multifamily Production Index (MPI) continued to show improvement, increasing for a sixth consecutive quarter. The MPI, which is based on a quarterly survey of multifamily builders and developers, tracks sentiment about construction of new apartments on a scale of 0 to 100. The MPI increased from 47.3 in the third quarter to 48.9 in the fourth quarter—the highest it’s been since the fourth quarter of 2005.
The MPI is a composite measure of builder/developer sentiment about production in three key components of the multifamily market: low-rent, market-rate rental, and condominiums. Like the overall MPI, each component lies on a scale of 0 to 100, where any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. In the fourth quarter of 2011, the MPI component tracking sentiment on market-rate rental construction increased to 64.3—the highest it’s been since NAHB began conducting the survey in 2003. Meanwhile, the low-rent MPI component also increased to 55.5, while the condo component remained relatively stable at 30.6.
The overall MPI has emerged as a leading indicator of the Census Bureau’s series on multifamily starts. Although starts remain well below the 300,000-plus per year plateau of 1996-2007, both series have been trending upward recently. A consistent upward trend in the MPI started in the fourth quarter of 2009, interrupted by only one relatively minor reversal in the second quarter of 2010. The Census multifamily starts series followed a similar pattern beginning about a year later.
For more information, including detailed tables on the components of the MPI, see the web page for NAHB’s Multifamily Production & Vacancy Indices.