Multifamily developer confidence increased year over year in the second quarter, according to the National Association of Home Builders’ (NAHB’s) Multifamily Market Survey. The Multifamily Production Index (MPI) rose two points to 46 year over year, while the Multifamily Occupancy Index (MOI) was up one point to 82.
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“Multifamily developer confidence and sentiment are showing slight signs of improvement when compared to this time last year,” said Debra Guerrero, senior vice president of strategic partnerships and government affairs at The NRP Group and chair of NAHB’s Multifamily Council. “High interest rates, rising construction costs, limited land availability, and restrictive local regulations are still significant issues in certain parts of the country. But confidence in subsidized affordable housing has shown considerable improvement in this survey, due in part to optimism surrounding the expansion of federal affordable housing resources flowing from the recent congressional reconciliation bill.”
The MPI measures builder and developer sentiment about conditions in the apartment and condo market on a scale of 0 to 100. According to the NAHB, the index and all of its components are scaled so that a number below 50 indicates more respondents are reporting that conditions are getting worse rather than improving.
The MPI is a weighted average of four key market segments: three in the build-to-rent market—garden/low-rise, mid/high-rise, and subsidized—and the build-for-sale, or condo, market.
- Garden/low-rise: Decreased three points to 50;
- Mid/high-rise: Increased seven points to 36;
- Subsidized: Jumped 10 points to 61; and
- Build-for-sale: Decreased three points to 35.
“An MPI that is up two points but still below 50 is consistent with NAHB’s projection that multifamily starts will be modestly higher in 2025 compared to 2024, while remaining significantly below the number of units started in 2023,” noted NAHB chief economist Robert Dietz. “Multifamily starts are still facing headwinds like higher interest rates and construction costs but are becoming less constrained by the number of apartments under construction, which is falling back toward more historically normal levels.”
The MOI’s reading of 82 indicates apartment owners are positive about occupancy. The MOI measures the multifamily industry’s perception of occupancies in existing apartments. It is a weighted average of current occupancy indexes for garden/low-rise, mid/high-rise, and subsidized and can vary from 0 to 100, with a break-even point at 50, where higher numbers indicate occupancy is good. All three components were in positive territory.
• Garden/low-rise: Increased two points to 84;
• Mid/high-rise: Decreased three points to 73; and
• Subsidized: Increased five points to 90.
