Confidence in the Market for New Multifamily Housing Improved in Q4 2021

According to the latest results from the National Association of Home Builder’s (NAHB) Multifamily Market Survey (MMS), in Q4 of 2021, confidence in the market for new multifamily housing improved.

The MMS produces two main indices. In Q4, the Multifamily Production Index (MPI) increased 1 point to a reading of 54 from Q3. The Multifamily Occupancy Index (MOI) declined six points to a reading of 69.

The MPI is a weighted average of three component indices measuring developer sentiment about production in different segments of the multifamily market: low-rent apartments supported by low-income tax credits or other government subsidy programs; market-rate rental apartments built to be rented at an unsubsidized market-clearing price; and for-sale units (i.e., multifamily condominiums). Each component index lies on a scale on of 0 to 100, where a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

The MOI measures the multifamily housing industry’s sentiment on occupancy in existing apartments. The MOI is also a weighted average of three components: occupancy in class A, B, and C apartments. Again, each component index lies on a scale from 0 to 100, with a break-even point at 50, where numbers above 50 indicate rising occupancy. The NAHB points out that even though the overall MOI fell six points to 69, it remains well above the break-even point of 50 and as high as it’s been at any time prior to the second quarter of 2021.

The strength of the MPI indicates that demand for new multifamily construction in many parts of the country has been strong enough to compensate for the rising costs of land, labor, and materials. The strong MPI is also consistent with Census production statistics, which show 750,000 apartments under construction and new apartments being started at a rate in excess of 500,000 per year.