Multifamily Builders’ Confidence Slips in Q3 as Economic Headwinds and Uncertainty Persist

The National Association of Home Builders (NAHB) today (11-17-22) released the results of its Multifamily Market Survey (MMS) for 22Q3. According to the MMS, builders’ confidence in the market for new multifamily housing declined appreciably during the time period.

The MNS producers two separate indices.

1. The Multifamily Production Index (MPI) is a weighted average of three key elements of the multifamily housing market: construction of low-rent units-apartments that are supported by low-income tax credits or other government subsidy programs; market-rate rental units-apartments that are built to be rented at the price the market will hold; and for-sale units—condominiums. The MPI declined 10 points to a reading of 32 compared to Q2 of 2022.
2. The Multifamily Occupancy Index (MOI) measures the multifamily housing industry’s perception of occupancies in existing apartments. It is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, with a break-even point at 50, where lower numbers indicate decreased occupancy. The MOI in Q3 dropped 15 points to a reading of 45.

The NAHB notes that even though the number of multifamily units under construction are at their highest level since December of 1973 and multifamily construction spending continues to increase, developers are starting to see signs of a slowdown evident by this quarter’s results. Higher costs of materials and land—coupled with weakening financial conditions, the result of recent monetary tightening by the Fed—have led the NAHB to project a ‘significant decline’ in multifamily starts in 2023.