Builders and developers engaged in the
multi-family market grew a little less confident in that market during the
fourth quarter of last year. The Multifamily
Production Index (MPI) developed by the National Association of Home Builders
(NAHB) dropped four points from its third quarter level to 50. A second NAHB index, the Multifamily Vacancy
Index (MVI), improved slightly for the quarter.
The MPI provides a composite measure of
builder and developer sentiment about current conditions in three elements of
the apartment and condominium market; construction of low-rent units,
market-rate rental units and "for-sale" units, or condominiums. The components are ranked on a scale of 0 to
100 and scaled so that a number of 50 indicates that the same number of
respondents report conditions are improving as report conditions are getting
Despite the decline in the composite MPI,
NAHB pointed out it was the eighth consecutive quarter the measure remained
over 50. The MPI component tracking perceptions
of market-rate rental properties has been the strongest of the components
recently, remaining above 50 for 13 straight quarters, but it too dipped four
points in the fourth quarter, from 64 to 60; while the component for low-rent
units fell three points to 47; and for-sale units declined four points to 46.
MVI measures the housing industry's
perception of multifamily vacancies. It dropped two points to 38, with lower
numbers indicating fewer vacancies. After peaking at 70 in the second quarter
of 2009, the MVI improved consistently through 2010 and has been fairly stable
"Multifamily developers are still seeing demand for apartments, as the MVI
shows," said W. Dean Henry, chairman of NAHB's Multifamily Leadership
Board. "However, the cost and availability of labor is putting pressure on
the ability to bring new units online."
NAHB Chief Economist David Crowe said the MPI was consistent with the
association's forecast calling for increased production of new apartments in
2014, but at a slower pace than last year.
"The results are also in line with recent downturns in other
economic indicators, due to unusually severe weather in parts of the country
that disrupted supply chains and affected confidence in several sectors of the
Historically, the MPI and MVI have performed well as leading indicators of U.S.
Census figures for multifamily starts and vacancy rates, providing information
on likely movement in the Census figures one to three quarters in advance.