Builders Slightly Less Upbeat on Rental Market

by devteam May 31st, 2013 | Share

The Multifamily Production Index (MPI)rncompiled by the National Association of Home Builders continued inrnpositive territory for the fifth straight time in the first quarterrnof 2013. The Index which measures builders perceptions about thernapartment and condominium markets, inched down two points to 52rncompared to the fourth quarter of 2012. </p

The MPI is conducted in a mannerrnsimilar to the the (NAHB)/Wells Fargo Housing Market Index (HMI). Builders and developers are asked, on a scale of 0 to 100, whetherrncurrent conditions are getting better, getting worse, or about thernsame in each of three market segments; the low rent and market rentrnmarkets and the for sale (condominium) market. Any number over 50rnindicates that more respondents report conditions are improving thanrnreport they are getting worse.</p

The component reflecting perceptions of<bmarket-rate rental properties dropped four points from the fourthrnquarter to 61 but has now been above 60 for seven consecutivernquarters, the longest sustained period of strength since NAHB beganrnto collect the data in 2003. Perceptions about low rent units roserntwo points to 55 while the rating of for sale units was down fourrnpoints to 42.

The MPI has made a substantial improvementrnsince hitting its low point of 16 in both the third and the fourthrnquarters of 2008. The level of 54 which it achieved in both thernsecond and fourth quarters of 2012 were all time high marks for therncomposite index.

“The apartment sector overall has<blargely recovered since the downturn, so we have now reached a levelrnof development that is close to equilibrium and can continue at thisrnpace,” said W. Dean Henry, chairman of NAHB’s MultifamilyrnLeadership Board. “With that said, there are still certainrnmarkets around the country that have room to grow.”

NAHB’srnMultifamily Vacancy Index (MVI), which measures the multifamilyrnhousing industry’s perception of vacancies, rose seven points to 38</bin the first quarter. With the MVI, lower numbers indicate fewerrnvacancies. After peaking at 70 in the second quarter of 2009, the MVIrnimproved consistently through 2010 and has been at a fairly moderaternlevel throughout 2011 and 2012.</p

NAHB said that both the MPI and the MVIrnhave performed well as leading indicators, successfully providingrninformation on likely U.S. Census figures for multifamily starts andrnvacancy rates one to three quarters in advance.</p

“The multifamily market hasrnrecovered substantially since the end of 2010, and is well on its wayrnto reaching a sustainable level,” said NAHB Chief EconomistrnDavid Crowe. “However, there are still issues facing buildersrnand developers that could have an impact on future production, suchrnas a shortage of labor with basic construction skills and risingrnprices for some building materials.”

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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