The Multifamily Production Index (MPI) posted a three point gain to 53 in the third quarter of 2016, according to the National Association of Homebuilders (NAHB). 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. This quarter marks the 19 consecutive quarter in which the MPI has been at or above 50 (Figure 1).

The MPI is composed of three key elements: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. All three components increased in the third quarter. Low-rent units rose two points to 54, and market-rate rental units and for-sale units both increased four points to 57 and 59, respectively.

The Multifamily Vacancy Index (MVI), which measures perceptions of vacancies in the multifamily market, remained unchanged at 42 in the third quarter. Similar to the MPI, the MVI falls on a scale between 0 and 100, with lower numbers indicating fewer vacancies. After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011 (Figure 2).

Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.

Both the MPI and MVI readings in the third quarter are consistent with NAHBs’ projection that the multifamily market will have a strong year in 2017. For a closer look at results from the third quarter, please visit here.