Confidence in the multifamily housing market showed tentative signs of improvement in the second quarter, with builder sentiment rising modestly year-over-year despite persistent challenges from high interest rates and construction costs, according to the latest National Association of Home Builders survey. 

The MMS produces two separate indices. The Multifamily Production Index (MPI) had a reading of 46, up two points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 82, 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. The component measuring garden/low-rise dropped three points to 50, the component measuring mid/high-rise units increased seven points to 36, the component measuring subsidized units jumped 10 points to 61 and the component measuring built-for-sale units posted a three-point decline to 35.

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 82 indicates existing apartment owners are positive about occupancy.

The MOI is a weighted average of three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized). All three components remain solidly in positive territory above 50: the component measuring garden/low-rise units increased two points to 84, the component measuring mid/high-rise units fell three points to 73 and the component measuring subsidized units rose five points to 90.

”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 in San Antonio and chairman 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.”

“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,” said 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 MMS was re-designed in 2023 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.

For additional information on the MMS, visit nahb.org/mms.

For more information on the NAHB Multifamily program, please visit NAHB Multifamily.