Confidence in the market for new multifamily housing remained unchanged in the fourth quarter of 2019, according to results from the National Association of Home Builders’ Multifamily Market Survey (MMS). The MMS produces two separate indices: The Multifamily Production Index (MPI) which remained even at 49 (Figure 1), and the Multifamily Vacancy Index (MVI) which also remained unchanged at 40 (Figure 2).
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 below 50 indicates that more respondents report conditions are getting worse than report conditions are improving.
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, and for-sale units (condominiums). In the fourth quarter, the component measuring low-rent units increased two points to 53, the market rate rental unit component rose six points to 50, while the for-sale unit component dropped four points to 46.
The MVI measures the multifamily housing industry’s perception of vacancies in existing apartments. It is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, where a number under 50 indicates more believe vacancies are decreasing than increasing. The MVI has remained unchanged at 40 for the past three quarters and is well under 50, indicating that vacancies are decreasing.
Production of new apartments has been strong for the last several months. Sentiment among multifamily developers would be higher if not for emerging housing policies such as rent control in certain parts of the country.
For data tables on the MPI and MVI, visit www.nahb.org/mms.