Dive Brief:

• Confidence in the new multifamily housing development market remained low in the fourth quarter of 2023, according to the National Association of Home Builders’ quarterly Multifamily Market Survey.
• The Multifamily Production Index derived from this survey, which measures builder and developer sentiment about multifamily market conditions, came in at a reading of 41 on a scale of 100. Any number below 50 indicates that more respondents reported poor conditions than good.
• Despite this, demand for existing multifamily remains high. The Multifamily Occupancy Index, which measures the industry’s perception of occupancy performance in the apartment and condo markets, came in at 77, well above the “break-even” point of 50.

Dive Insight:

Each of the two NAHB indices is a weighted average of responses from professionals in four market segment components: garden/low-rise rentals, mid/high-rise rentals, subsidized rentals and condos of all types. 

On the MPI, mid/high-rise rentals had the lowest sentiment rating at 26, while garden/low-rise rentals had the highest at 51. Subsidized rentals and for-sale condos came in at 41 and 43 respectively.

“Tight lending standards and the high cost of development loans continue to impede the financing of new multifamily projects,” said Lance Swank, president and CEO of Mishiwaka, Indiana-based real estate investor Sterling Group and chairman of NAHB’s Multifamily Council, in a press release. “Developers in many parts of the country have also become cautious as they see a substantial number of new apartments being delivered and more that are ready to come online.”

The MPI fluctuated over the course of the last year, down from a high of 56 in the first quarter. This is the second quarter in a row in which the MPI was negative, up slightly from 38 in the third quarter.

When asked how current market conditions in their areas compared to three months earlier, only 14% of respondents said it was better than it had been. Sixty-three percent said it was about the same, and 23% said it was worse.

“An MPI below 50 at the end of 2023 is consistent with the weakness in multifamily starts the Census Bureau reported in January,” said NAHB Chief Economist Robert Dietz. “NAHB projects that multifamily production will be down in 2024, as the number of apartments currently under construction is near its highest level since 1973.”