Builder Confidence in Multifamily Market Slips in Third Quarter

Builder confidence in the multifamily housing market sagged in the third quarter of 2008, pushing both the Multifamily Condo Market Index (MCMI) and the Multifamily Rental Market Index (MRMI) to their lowest levels since the National Association of Home Builders (NAHB) created the indexes in 2003, according to the association's latest report.

"We have a serious supply/demand imbalance in the housing market, coupled with a weakening job market, and stringent credit market conditions, and that is negatively impacting the multifamily sector," says David Seiders, NAHB's chief economist.

The component of the MRMI that gauges supply was dramatically lower for both market-rate and affordable apartments, standing at 22.2 and 15.7 respectively for the third quarter. At the same time last year, the same component stood at 43.8 for market-rate and 44.3 for affordable apartments.

NAHB's Multifamily Market Indexes are derived from a quarterly survey of multifamily builders and developers in which their responses are rated on a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

The MCMI, which gauges current and expected supply in the condominium market, sank into single-digits for the first time: the index value for current conditions stood at 8.1 in the third quarter, dropping more than five points from 13.5 at the same time last year. Builder confidence in the condo market over the next six months remains low as well: the index tracking this measure fell from 20.8 in the third quarter of 2007 to 9.9 in the third quarter of this year.

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