In the first quarter of 2012, NAHB’s Multifamily Production Index (MPI) continued to show improvement, increasing from 49 in the fourth quarter to 51. This is the highest the MPI has been since the third quarter of 2005 and marks the seventh consecutive quarter that the index has increased.
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. 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 first quarter of 2012, the MPI component tracking sentiment on market-rate rental construction increased to 69—the highest it’s been since NAHB began conducting the survey in 2003. The low-rent MPI component dipped slightly to 53, while the for-sale or condo component remained the weakest of the three but nevertheless increased to 37, which is the highest it’s been since the fourth quarter of 2005.
The overall MPI continues to function as a leading indicator of the Census Bureau’s series on multifamily starts. Currently both series are trending upward. The 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