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Multifamily production skyrockets in 2011, up 178% from 2008

Up, up, and away

Without question, the multifamily sector has kept much of the real estate industry afloat in recent years as homeowners lose homes, rent apartments and make construction possible despite continued difficulty with construction loans. According to the National Association of Home Builders’ (NAHB) Multifamily Production Index (MPI), the second quarter of 2011 continued to show improvement for the fourth quarter in a row.

The MPI jumped from 41.7 in the first quarter of the year to 44.4 in the second quarter, representing a marked 178 percent improvement from the MPI record low of 16.0 points in the third quarter 2008.

Cautious optimism

According to the NAHB, “The index provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, construction of market-rate-rent units, and construction of “for sale” units. 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. In the second quarter of 2011, a majority of developers saw improvements in the production of low-rent and market-rate units.”

“Multifamily rental construction is trending upward, and it is definitely the brightest sector in the broader housing market,” said NAHB Chief Economist David Crowe. “However, the entire housing market continues to be very fragile and subject to many external pressures, including an ongoing shortage of financing for new projects.”

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Developers expectations are cautiously optimistic regarding the remainder of 2011, noting market uncertainty (with builders and consumers) as a “dampening effect.”

“Even though multifamily is trending upward, production is still very low in a historic context and in the context of what we project is necessary to meet long-term demand,” Crowe said. With the number of multifamily starts and new “accidental landlords,” we do not share the certainty that demand for multifamily units will continue to rise indefinitely, but rather as a short term effect of the recession.

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.

28 Comments

28 Comments

  1. Manhattan Beach Realtor

    September 18, 2011 at 2:02 pm

    With rental rates on the rise along with unemployment, and an increasing number of previous buyers now turned long term renters via property default, it's no wonder that multifamily residential is booming! But builders and investors should remember that everything comes in cycles, and the pendulum will one day (maybe sooner than expected) swing in the other direction. My personal take is that this part of the RE cycle could last for another 5-10 years, until consumer balance sheets are sufficiently repairs, savings re-accumulated, and labor markets sorted out from the great recession that has yet to really end. But end it will and new waves of renters-turned-buyers will hit the market, reversing the process.

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