Connect with us

Hi, what are you looking for?

The American GeniusThe American Genius

Economic News

Multifamily developer sentiment hits highest level since 2005

As a forward-looking economic indicator, we look at the improving sentiment of multifamily developers as a sign of improving market health overall.

Production on the rise

The Multifamily Production Index (MPI), released by the National Association of Home Builders (NAHB) today, improved for the eighth consecutive quarter with an index level of 54, marking the index’s highest reading since the second quarter of 2005.

The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100, rising from 51 in the first quarter to 54 in the second quarter.

According to the NAHB, “The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.”

With this sentiment reading, multifamily has officially surpassed the optimism felt in the single-family new home market.

Advertisement. Scroll to continue reading.

Recent increases in the MPI

In the second quarter of 2012, the MPI component tracking builder and developer perceptions of market-rate rental properties recorded a level of 63 and has been over 60 for four consecutive quarters—the longest sustained period of strength since the inception of the index in 2003. For-sale units had its highest reading since the fourth quarter of 2005, coming in at 41, while low-rent units recorded an all-time high of 61.

“The apartment and condo housing sector is continuing on a path of steady recovery as new construction has increased to try to keep up with current consumer demand,” said W. Dean Henry, CEO of Legacy Partners Residential, and chairman of NAHB’s Multifamily Leadership Board. “However, credit continues to be an issue for many developers around the country, making it difficult to keep pace with this demand.”

The improving Multifamily Vacancy Index

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, increased five points to 36, bringing it back approximately to the level it sustained throughout 2011. With the MVI, lower numbers indicate fewer vacancies. After peaking at 70 in the second quarter of 2009, the MVI declined consistently through 2010, then held steady at either 35 or 36 in every quarter of 2011.

“The strength of the MPI suggests that multifamily production is likely to increase somewhat going forward,” said NAHB Chief Economist, Dr. David Crowe. “Multifamily production has already recovered substantially from a historic low of about 110,000 starts a year in 2009 and 2010 to the current annual rate of a little over 200,000. However, prior to the downturn multifamily starts remained about 300,000 per year for 12 consecutive years, so there is room for further improvement before apartment and condo production return to normal, sustainable levels.”

The NAHB reports that “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.”

Advertisement. Scroll to continue reading.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

1 Comment

1 Comment

  1. Matthew Fuller

    September 6, 2012 at 5:16 pm

    Our new home market is just about sold out in San Francisco – our largest new development is already 85% sold, with not much in the pipeline until 2014.

Leave a Reply

Your email address will not be published. Required fields are marked *

Advertisement

The
American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.

Advertisement

KEEP READING!

Commercial Real Estate

When considering whether you should lease your office space or buy, an industry expert outlines the questions you should ask yourself.

Real Estate Technology

(TECH NEWS) It turns out that Internet of Things, like smart bulbs in homes, are not secure and give up your info - here...

Real Estate Marketing

(MARKETING) Your fancy, self-animating website might be making people violently ill, even if it is insanely beautiful. Sorry...

Real Estate Marketing

(MARKETING) Conduit is a CRM that does more than CRM, it analyzes your networking data to help you see how to improve your relationships.

The American Genius is a strong news voice in the entrepreneur and tech world, offering meaningful, concise insight into emerging technologies, the digital economy, best practices, and a shifting business culture. We refuse to publish fluff, and our readers rely on us for inspiring action. Copyright © 2005-2022, The American Genius, LLC.