The National Association of Home Builder’s Multifamily Production Index (MPI) increased one point to 53 in the first quarter of 2016 (Exhibit 1). This quarter marks the 17th consecutive quarter in which the index has been above its breakeven point of 50, which means that more builders and developers report that current conditions in the apartment and the condominium market are improving than report conditions are getting worse.
Exhibit 1: NAHB Multifamily Production Index (MPI) and Multifamily Starts (in thousands)
The MPI is comprised of three key components that measure the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. The low-rent units component increased four points to 54, while the market-rate rental units and for-sale units components both dropped one point to 58 and 48, respectively.
The Multifamily Vacancy Index (MVI), which measures respondent perceptions of vacancies in the multifamily housing market, decreased one point to 39 in the first quarter of 2016. A MVI below 50 indicates that more respondents perceived a reduction in vacancy rates than perceived vacancies were increasing. After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011 (Exhibit 2). Historically, the MVI has shown to be a leading indicator of Census multifamily vacancy rates, which is displayed in Exhibit 2 as well.
Exhibit 2: NAHB Multifamily Vacancy Index (MVI) and 5+ Rental Vacancy Rate
The first quarter’s reading of both the MPI and the MVI are consistent with the NAHB’s expectation that the multifamily housing market is reaching equilibrium and will remain relatively stable through 2016.
For data tables on the MPI and MVI, visit www.nahb.org/mms.