Multifamily Market Confidence Unchanged in Q4

Washington, DC, February 28, 2020-Confidence in the market for new multifamily housing remained unchanged in Q4, according to results from the Multifamily Market Survey (MMS) released by NAHB. 

The MMS produces two separate indices. 

The Multifamily Production Index (MPI) remained even at 49, while the Multifamily Vacancy Index (MVI) also remained even with a reading of 40. The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. The MPI is a weighted average of three key elements of the multifamily housing market: construction of low-rent units-apartments that are supported by low-income tax credits or other government subsidy programs; market-rate rental units-apartments that are built to be rented at the price the market will hold; and for-sale units-condominiums. The component measuring low-rent units increased two points to 53, the component measuring market rate rental units rose six points to 50 and the component measuring for-sale units 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 property managers believe vacancies are decreasing than increasing. With a reading of 40, the MVI has remained unchanged for the past three quarters and well under 50, indicating vacancies are improving.

“Demand for apartments has been strong for the past several months, especially for apartments that are more affordably priced,” said Barry Kahn, president of Hetting-Kahn Holdings in Houston and chairman of NAHB’s Multifamily Council. “We are seeing an increased need for affordable housing in most markets around the country.”

“Favorable weather conditions and high rates of production contributed to a positive outlook among multifamily developers in the fourth quarter,” said NAHB Chief Economist Robert Dietz. “Sentiment would be higher, but it is being constrained by emerging concerns over housing policies enacted in certain parts of the country, especially proposed rent control policies.”