Builder Confidence in Multifamily Market Slips even as Vacancies Decline

Builders and developers engaged in thernmulti-family market grew a little less confident in that market during thernfourth quarter of last year.  The MultifamilyrnProduction Index (MPI) developed by the National Association of Home Buildersrn(NAHB) dropped four points from its third quarter level to 50.  A second NAHB index, the Multifamily VacancyrnIndex (MVI), improved slightly for the quarter.</p

The MPI provides a composite measure ofrnbuilder and developer sentiment about current conditions in three elements ofrnthe apartment and condominium market; construction of low-rent units,rnmarket-rate rental units and “for-sale” units, or condominiums.  The components are ranked on a scale of 0 torn100 and scaled so that a number of 50 indicates that the same number ofrnrespondents report conditions are improving as report conditions are gettingrnworse.</p

Despite the decline in the composite MPI,rnNAHB pointed out it was the eighth consecutive quarter the measure remainedrnover 50.   The MPI component tracking perceptionsrnof market-rate rental properties has been the strongest of the componentsrnrecently, remaining above 50 for 13 straight quarters, but it too dipped fourrnpoints in the fourth quarter, from 64 to 60; while the component for low-rentrnunits fell three points to 47; and for-sale units declined four points to 46.</p

MVI measures the housing industry’srnperception of multifamily vacancies.   It dropped two points to 38, with lowerrnnumbers indicating fewer vacancies. After peaking at 70 in the second quarterrnof 2009, the MVI improved consistently through 2010 and has been fairly stablernsince 2011.<br /<br /"Multifamily developers are still seeing demand for apartments, as the MVIrnshows,” said W. Dean Henry, chairman of NAHB’s Multifamily LeadershiprnBoard. “However, the cost and availability of labor is putting pressure onrnthe ability to bring new units online.”<br /<br /NAHB Chief Economist David Crowe said the MPI was consistent with thernassociation's forecast calling for increased production of new apartments inrn2014, but at a slower pace than last year. rn”The results are also in line with recent downturns in otherrneconomic indicators, due to unusually severe weather in parts of the countryrnthat disrupted supply chains and affected confidence in several sectors of therneconomy.”<br /<br /Historically, the MPI and MVI have performed well as leading indicators of U.S.rnCensus figures for multifamily starts and vacancy rates, providing informationrnon likely movement in the Census figures one to three quarters in advance.

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