Multifamily Market Survey Moved Lower in Q1 of 2022, Ending Three Consecutive Quarters of Growth

According to the latest results of the National Association of Home Builders’ (NAHB) Multifamily Market Survey (MMS), confidence in the market for new multifamily housing moved lower in Q1 of 2022. The MMS produces two main indices, the Multifamily Production Index (MPI) and the Multifamily Occupancy Index (MOI), both of which were lower.

The Multifamily Production Index (MPI) declined by -6 points to a reading of 48 in Q1 of 2022, falling below the break-even mark of 50 for the first time in three quarters. 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. Two of the three components decreased from the fourth to the first quarter: The component measuring low-rent units increased one point to 49; the component measuring market rate rental units dropped 12 points to 49; and the component measuring for-sale units fell nine points to 44.

The Multifamily Occupancy Index (MOI), which measures the multifamily housing industry’s sentiment about occupancy rates in existing apartments, dropped -1 point to a reading of 68. The MOI is also a weighted average of three components, for 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. Although the overall MOI inched down one point to 68, it is still well above 50 and is consistent with the recent high rates of occupancy reported by the Census Bureau.

The MMS concludes that strong demand is still keeping multifamily developers fairly optimistic in many parts of the country. However, higher construction costs and their impact on affordability are starting to make some developers cautious. The caution has not shown up yet in the multifamily starts rate, which remains quite strong, but the MPI typically leads changes in starts by one to three quarters.