The National Association of Home Builders (NAHB) Multifamily Market Survey (MMS) released Aug. 22 shows an increase of confidence in the market for new multifamily housing in the second quarter of 2019.

Of the MMS’s two indices the Multifamily Production Index (MPI) increased 16 points (56) while the Multifamily Vacancy Index (MVI) fell eight points (40). Lower numbers indicate fewer vacancies.

“Historically, the MPI and MVI tend to move one to three months ahead of U.S. Census figures for multifamily starts and vacancy rates, but in the second quarter we saw positive gains in both the NAHB and Census measures at the same time,” said NAHB chief economist Robert Dietz. “This is a sign of solid demand for multifamily housing in the second quarter, which was supported by low unemployment and a healthy number of household formations.”

For MPI, a number below 50 indicates that more respondents report conditions are getting worse based on a 0-to-100 scale of builder and developer sentiments about current conditions.

The MPI’s weighted average of three separate elements of the multifamily housing market showed gains in all three with:

  • Construction of low-rent units (56)–apartments that are supported by low-income tax credits or other government subsidy programs, up nine points;
  • Market-rate rental units (64)–apartments that are built to be rented at the price the market will hold, up 22 points; and
  • For-sale units (50)–condominiums, up 19 points.

“Overall, builders and developers are reporting increased confidence in the multifamily housing market,” said Gary Campbell, CEO of Gilbert G. Campbell Real Estate in Lowell, Mass., and chairman of NAHB’s Multifamily Council. “However, they still have to deal with the high cost of land, labor and regulation, which could impact future production.”

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, this is the lowest reading since the second quarter of 2017.

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