Washington D.C.—Confidence in the market for new multifamily housing increased in the first quarter of 2021, according to results from the Multifamily Market Survey (MMS) by the National Association of Home Builders (NAHB).
The MMS produces two separate indices. The Multifamily Production Index (MPI) increased eight points to 51 compared to the previous quarter. It is the first time the MPI has been over 50 in seven quarters, the NAHB said. Meanwhile, the Multifamily Occupancy Index (MOI) increased one point to 59.
The MPI measures builder and developer sentiment about current conditions in the apartment and condo 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.
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 rent at the price the market will hold; and for-sale units—condominiums. All three components increased in the first quarter. The component measuring low-rent units rose four points to 46, the component measuring market rate rental units increased six points to 54 and the component measuring for-sale units jumped 13 points to 52.
The MOI index replaced the former Multifamily Vacancy Index (MVI) and is based on the same underlying data, the NAHB said. The MOI measures the multifamily housing industry’s perception of occupancies 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 with a break-even point at 50, where higher numbers indicate increased occupancy. With a reading of 59, the MOI has improved over the last three quarters, according to the NAHB.
“We continue to see strong demand for rental housing, especially in the suburbs,” said Justin MacDonald, president and chief executive officer, The MacDonald Companies, Kerrville, Texas and chairman of NAHB’s Multifamily Council. “But an increase in building material prices and difficulties obtaining approvals remain significant headwinds for the industry.”
Robert Dietz, NAHB economist, added, “The MPI reversed trend and rose strongly in the second quarter of last year, one quarter before a similar turn-around in the multifamily housing starts data. Since then, multifamily starts have mirrored the MPI. The surge that we saw in the MPI for the first quarter of 2021 coincides with a similar surge in multifamily starts to a seasonally adjusted annual rate of more than 450,000 units. Based on these recent numbers, NAHB now expects a gain in multifamily starts this year.”