The NAHB’s Multifamily Production Index (MPI), which measures builder and developer sentiment about conditions in the apartment and condominium market, dropped 10 points to 46 in the third quarter. The index measures sentiment on a scale of 0-100, with any number above 50 indicating that more respondents see conditions as improving than getting worse. The third quarter’s reading of 46 is the index’s lowest score since Q2 of 2011.
The MPI combines measurements of three elements of the multifamily market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. In the third quarter, the index readings for market-rate rental units and for-sale units both plunged 17 points to 43 and 40, respectively. The reading for low-rent units inched up one point to 54.
“We’re starting to see various markets across the country become oversupplied with multifamily construction, so builders and developers are pulling back a bit,” said Dan Markson, chairman of the NAHB Multifamily Council.
“Multifamily production had been quite strong, although it slowed down in the past three months,” said NAHB Chief Economist Robert Dietz. “And with approximately 600,000 units in the pipeline, builders and developers are taking a cautious approach until they see how the market absorbs these units when they come online.”
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Multifamily developer confidence hit a six-year low in the third quarter, according to new data from the National Association of Home Builders.