Confidence in the multifamily housing market weakened in the third quarter, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two separate indices: the Multifamily Production Index (MPI) and the Multifamily Vacancy Index (MVI).

The MPI, which measures builder and developer sentiment about current production conditions in the apartment and the condominium market, dropped three points to 48 in the third quarter (Figure 1). The MPI sits on a scale of 0 to 100, where a reading over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

The MPI is a weighted average of three key elements of the multifamily market: construction of low-rent units—apartments supported by low-income tax credits or other government subsidy programs; market-rate rental units—apartments built for rent at the price the market will hold; and for-sale units—condominiums. In the third quarter, the component measuring low-rent increased two points to 59, while market rate rental units fell four points to 46 and for-sale units slipped seven points to 39.

The MVI, which measures the multifamily housing industry’s perception of vacancies, rose two points to 47 in the third quarter (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. This is the highest reading since the first quarter of 2010.

The shifts seen in the both the MPI and the MVI point to affordability concerns arising in the multifamily market. On the production side, the multifamily market (as well as the single-family market) face challenges such as shortages of labor and regulatory costs that are contributing to the pricing out of consumers in the marketplace.  For data tables on the MPI and MVI, visit www.nahb.org/mms.

For more information on the NAHB Multifamily program, please visit NAHB Multifamily: https://www.nahb.org/en/members/committees-and-councils/councils/multifamily-council/nahb-multifamily.aspx.