Confidence encouraged by strong demand for rental housing but tempered by building material prices and difficulty obtaining approvals.
Builder and developer confidence in new multifamily housing construction increased in Q1 2021, according to the National Association of Home Builders’ (NAHB) Multifamily Market Survey and its two indices—the Multifamily Production Index (MPI) and the Multifamily Occupancy Index (MOI).
In its release on the two indices, the National Association of Home Builders (NAHB) states the MPI increased eight points from the previous quarter to a score of 51, the first time in seven quarters that the level was above 50.
The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100, with scores above 50 indicating that more respondents view conditions as improving rather than worsening. It looks at three components: Low-rent units – apartments supported by government programs or low-income tax credits; market-rate rental apartments leased at the market price; and for-sale condominiums. All three sections improved in the first quarter of 2021. The low-rent component improved four points to 46, while the market-rate rentals increased six points to 54. For-sale condos skyrocketed 13 points to 52.
The MOI, which is a weighted average of the three elements referenced above, improved one point to 59. The MOI is a new index this quarter, but it measures the same information as its predecessor, the Multifamily Vacancy Index: The industry’s perception on existing apartment occupancies. The MOI has improved the last three quarters. Higher numbers signify increased occupancy. The MOI is also 17 points higher than the second quarter of 2020.
“We continue to see strong demand for rental housing, especially in the suburbs,” said Justin MacDonald, President and CEO of The MacDonald Companies in Kerrville, Texas, and Chairman of NAHB’s Multifamily Council, in the release. “But an increase in building material prices and difficulties obtaining approvals remain significant headwinds for the industry.”