Multifamily sentiment improves despite spike in vacancies

by Candyd Mendoza25 Aug 2020

Confidence in the multifamily housing market improved in the second quarter but remains below pre-coronavirus levels, according to results from the Multifamily Market Survey (MMS) by the National Association of Home Builders.

"Confidence among multifamily builders and developers increased in the second quarter, but it's still below where we were before the pandemic hit," said Barry Kahn, chairman of NAHB's Multifamily Council.

The Multifamily Production Index (MPI), which measures builder and developer sentiment about current conditions in the apartment and condo market, climbed 10 points to 37 quarter over quarter. The MPI comprises three components, and all of them posted gains in Q2.

The component that measures low-rent units increased 10 points to 42, the component measuring market-rate rental jumped five points to 34, and the component measuring for-sale units rose 13 points to 35.

Meanwhile, the Multifamily Vacancy Index (MVI) experienced a three-point increase to a reading of 62, which indicates more vacancies and is the highest reading since 2009.

"The multifamily market continues to make its way back toward pre-pandemic levels, with recent starts data coming in above forecast," said NAHB Chief Economist Robert Dietz. "Demand remains subdued due to elevated unemployment rates, while on the supply-side of the market builders and developers are dealing with a significant increase in lumber prices, which could hinder further recovery of the market."