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Optimistic Outlook for Multifamily Development

Mar 28, 2011 11:58 AM

Two quarterly indices produced by the National Association of Home Builders (NAHB) indicate a return to healthy market conditions for both new and existing apartment and condominium buildings.

The Multifamily Production Index (MPI), which tracks developer sentiment about new construction on a scale of 1 to 100, is at 40.8 — up more than five full points since the previous quarter and the highest number since the fourth quarter of 2006.

The MPI component tracking developers’ perception of market-rate rental properties is at 51.7 — the first time this component of the index has been above 50 since the second quarter of 2007.

The index and all of its components are scaled so that any number greater than 50 indicates more respondents report conditions are improving than report conditions are worsening.

The Multifamily Vacancy Index (MVI) shows similar reason for optimism, declining to 33.3, which is the smallest number since the third quarter of 2006 — and half of what it was a year and a half ago. Smaller numbers indicate fewer vacancies.

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.

To see the Fourth Quarter 2010 Multifamily Market Index, visit www.nahb.org/mmi.

Source: The NAHB

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