Confidence in the market for new multifamily housing declined year-over-year in the first quarter of 2024, according to results from the Multifamily Market Survey (MMS) released by the National Association of Home Builders (NAHB). The MMS produces two separate indices. The Multifamily Production Index (MPI) had a reading of 47, down three points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 83, up one point year-over-year.

The MPI measures builder and developer sentiment about current production conditions in the apartment and condo market on a scale of 0 to 100. The index and all its components are scaled so that a number below 50 indicates that more respondents report conditions are poor than report conditions are good.

The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise and subsidized) and one in the built-for-sale (or condominium) market. All four of the components posted year-over-year declines: the component measuring garden/low-rise declined two points to 55, the component measuring mid/high-rise units fell five points to 36, the component measuring subsidized units dipped one point to 50 and the component measuring built-for-sale units posted a three-point decline to 39.

The MOI measures the multifamily housing industry’s perception of occupancies in existing apartments on a scale of 0 to 100. The index and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it is poor. The reading of 83 indicates existing apartment owners are very positive about occupancy.

The MOI is a weighted average of three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized). The components measuring garden/low-rise units and mid/high-rise units both remained unchanged year-over-year, with a reading of 84 and 74, respectively. The component measuring subsidized units increased seven points to 94.

“Multifamily developers are concerned about higher interest rates for construction and development loans and tighter lending conditions that are taking place in the market right now,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council. “There are also many areas across the country where developers are having a difficult time getting their projects approved.”

“Owners of existing apartments continue to report strong occupancy, but this has the potential to soften when more of the 900,000-plus apartments currently under construction come on line,” said NAHB Chief Economist Robert Dietz. “NAHB is currently projecting that multifamily starts will fall 28% this year as developer activity slows.”

The MMS was re-designed last year to produce results that are easier to interpret and consistent with the proven format of other NAHB industry sentiment surveys. Until there are enough data to seasonally adjust the series, changes in the MMS indices should only be evaluated on a year-over-year basis.

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