Confidence in the Multifamily Market remained firm in the first quarter of 2018 with a Multifamily Production Index (MPI) of 53, according to the National Association of Home Builders (NAHB) (Figure 1). 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 of its components are scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse.
The MPI is a weighted average comprised of three key elements of the multifamily market: construction of low-rent units, market-rate rental units, and for-sale units (condominiums). In the first quarter of 2018, the low-rent units component dipped two points to 54, while the market rate rental units component increased two points to 56, and the for-sale units component remained unchanged at 49.
Along with the MPI, the NAHB produces the Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies. In the first quarter of 2018, the MVI remained essentially unchanged, rising one point to 42 (Figure 2). The MVI is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, where any number over 50 indicates more property managers report more vacant apartments.
The MPI and MVI readings are consistent with NAHB’s view that the market has reached a healthy, sustainable level. The overall economy is supporting robust levels of demand and balancing supply-side issues, such as labor and lot shortages, and the recent surge in lumber prices. On a year-to-date basis, multifamily starts are up 10 percent compared to last year, outpacing the NAHB multifamily forecast of flat production growth.