The Multifamily Market Survey (MMS), released by the National Association of Home Builders (NAHB), shows weakening confidence among multifamily builders and developers. The survey shows a Multifamily Production Index (MPI) dropping three points to 48 from the previous quarter—a result that’s less surprising, considering that the Multifamily Vacancy Index (MVI) rose two points over the same period, to 47.

The MPI survey measures on a scale of zero to 100, in which a number above 50 shows market conditions as more good than bad. The index is a weighted average of three elements: construction of low-rent units, market-rate rental units and for-sale units. According to NAHB, the component measuring low-rent units increased two points to 59, while the component measuring market rate rental units fell four points to 46. Meanwhile, the component measuring for-sale units dropped seven points to 39.

“The drop in the MPI is consistent with affordability concerns that have emerged in the single-family market,” says NAHB chief economist Robert Dietz. “Both sectors of the housing market face similar challenges, such as shortages of labor and increased regulatory costs. This quarter’s MPI is yet another signal to policymakers that they should be paying more attention to housing market conditions as interest rates increase.”

The MVI measures the multifamily housing industry’s perception of vacancies, and is a weighted average of current occupancy indexes for class A, B, and C multifamily units. The number ranges from zero to 100, with a number over 50 indicating more vacant apartments. The recent 47 reading is the highest recorded since the first quarter of 2010.

“We are starting to see an increase in vacancy rates, which may indicate a saturation in the luxury apartment market,” says Steve Lawson, chairman of NAHB’s multifamily council. “Rising regulatory and construction costs are also affecting developers’ ability to build apartments for the ‘middle-income’ market where housing is greatly needed.”