Confidence in the new multifamily housing market has seen a year-over-year decline in the first quarter of 2024, as per the Multifamily Market Survey (MMS) results released by the National Association of Home Builders (NAHB). The MMS consists of two separate indices - the Multifamily Production Index (MPI) and the Multifamily Occupancy Index (MOI). The MPI saw a three-point decrease from last year, with a reading of 47, while the MOI recorded an increase of one point to 83.
The MPI gauges builder and developer sentiment about current production conditions in the apartment and condo market on a scale of 0 to 100. A number below 50 on this index suggests that more respondents perceive conditions as poor rather than good. The MPI is a weighted average of four key market segments: three in the built-for-rent market and one in the built-for-sale or condominium market. All four components witnessed year-over-year declines.
The MOI, on the other hand, assesses industry perception of occupancies in existing apartments. An index reading above 50 indicates that more respondents report good occupancy than poor. The MOI's score of 83 signifies a positive sentiment among existing apartment owners about occupancy.
Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council, stated, “Multifamily developers are concerned about higher interest rates for construction and development loans and tighter lending conditions that are taking place in the market right now.” He added that developers are struggling to get their projects approved across many areas in the country.
Robert Dietz, NAHB Chief Economist, noted that while existing apartments continue to report strong occupancy, this could potentially soften when more than 900,000 apartments currently under construction become available. He also mentioned that NAHB projects a 28% fall in multifamily starts this year due to slowing developer activity.
The MMS was redesigned last year to produce results that are easier to interpret and consistent with other NAHB industry sentiment surveys. Until there is enough data for seasonal adjustment, changes in the MMS indices should only be evaluated on a year-over-year basis.
For more information about the MMS and the NAHB Multifamily program, please visit their respective websites.
