The Multifamily Production Index (MPI) dropped seven points to 48 in the first quarter of 2017, according to the National Association of Home Builders (NAHB). The last time the MPI had a reading below 50 was in the fourth quarter of 2011 (Figure 1).
Figure 1: NAHB Multifamily Production Index (MPI) and Multifamily Starts (in thousands)
The MPI measures builder and developer sentiment about current conditions in the multifamily 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 composite measure of three key elements: construction of low-rent units, market-rate rental units, and “for-sale” units, or condominiums. All three components decreased in the first quarter: low-rent units dropped six points to 48, market-rate rental units dipped three points to 55 and for-sale units fell nine points to 43.
NAHB also produces the Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies. In the first quarter of 2017 the MVI dropped one point to 41, which indicates fewer vacancies compared to the previous quarter. 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).
Figure 2: NAHB Multifamily Vacancy Index (MVI) and 5+ Rental Vacancy Rate
The drop in the MPI is consistent with the NAHB multifamily forecast – that there will be a general leveling off of multifamily production activity as the market reaches equilibrium. For detailed tables of the MPI and MVI, please visit www.nahb.org/mms.