Confidence in the multifamily market edged down slightly in the second quarter of 2018 with the Multifamily Production Index (MPI) falling two points to 51, 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.
An MPI of 51 reflects the solid number of multifamily starts so far this year, but developers are continuing to monitor the impact of tariffs and possible further trade restrictions on key construction materials.
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 second quarter of 2018, the component measuring low-rent units rose three points to 57, while the component measuring market rate rental units fell six points to 50 and the component measuring for-sale units dropped three points to 46.
Along with the MPI, the NAHB produces the Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies. In the second quarter of 2018, the MVI rose three points to 45 (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.
If you would like more information about the NAHB Multifamily program, please visit the NAHB Multifamily page here.