According to the Multifamily Production Index (MPI) released yesterday by the National Association of Home Builders (NAHB), multifamily builder confidence has gone down. The MPI has dropped two points to 51 compared to the first quarter.

The NAHB states that the MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. If a number is above 50, it indicates that conditions are improving. The MPI averages three housing market elements: 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 low-rent component rose 3 points to 57, while the market rate rental units component fell six points to 50, and the for-sale units component dropped three points to 46.

The Multifamily Vacancy Index (MVI) rose three points to 45. The MVI, which measures the multifamily housing industry’s perception of vacancies, is a weighted average of current occupancy indexes for class A, B, and C multifamily units. This score can also vary from 1 to 100, and any number over 50 indicates more vacant apartments. The NAHB reassures that although the MPI increased in the second quarter, a reading of 45 is still a healthy number for the multifamily market.

“Multifamily builders and developers are seeing strong demand, but there are headwinds that have impacted further development,” says Steve Lawson, chairman of NAHB’s Multifamily Council. “Some developers have had difficulty getting projects off the ground due to regulatory burdens and neighborhood opposition in certain parts of the country.”

“Although the MPI is down two points in the second quarter, it is still above 50, reflecting a solid number of multifamily starts so far this year,” says NAHB chief economist Robert Dietz. “In addition to regulatory costs, developers still need to monitor the impact of tariffs and the threat of further trade restrictions on building materials prices, especially lumber.”

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