Eye On Housing
NAHB’s Multifamily Production Index (MPI) edged up one point to 55 in the second quarter, marking the 14th consecutive quarter that the index has been 50 or above.
The MPI measures builder and developer sentiment 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. Historically, the MPI has performed well as a leading indicator of the Census Bureau’s measure of multifamily starts.
The MPI is a weighted average of three components that measure industry sentiment about construction of low-rent apartments, market-rate rental apartments, and “for-sale” apartments or condominiums. In the second quarter, the MPI component tracking low-rent units stayed steady at 54, while market-rate rental units increased one point to 60 and for-sale units rose three points to 53.
The same NAHB survey produces the Multifamily Vacancy Index (MVI), which captures the industry’s sentiment about vacancies in existing rental apartments. In the second quarter of 2015, the MVI improved for the third straight time, dropping two points to 34. This is the best (i.e., lowest) the index has been since 2012.
The MVI has served as a leading indicator of the Census Bureau’s rental vacancy rate in buildings with five or more apartments, which has also been improving for several quarters. In fact, in the second quarter of 2015, the Census 5+ vacancy rate dropped to its lowest level since 1984.
The MVI and MPI are providing good signs of the overall health of the multifamily market. However, multifamily developers are subject to the same local shortages of labor and subcontractors that have hindered single-family builders in certain pats of the country.
For more information, including the full history and derivation of each of the components of the MPI and MVI, see the web page for NAHB’s quarterly Multifamily Market Survey.
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