Apartment, Condominium Developer Sentiment in U.S. Remains Steady in Q3

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The National Association of Home Builders (NAHB) is reporting this week that the Multifamily Production Index (MPI), increased one point to a level of 56 for the third quarter of 2015. This is the 15th consecutive quarter with a reading of 50 or above.

The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and "for-sale" units, or condominiums. The MPI component tracking low-rent units increased one point to 55 and market-rate rental units rose four points to 64 while for-sale units dropped three points to 50.

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, increased five points to 39, with higher numbers indicating more vacancies. After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011.

"Multifamily builders and developers continue to report that the market is doing quite well," said W. Dean Henry, CEO of Legacy Partners in Foster City, Calif., and chairman of NAHB's Multifamily Leadership Board. "We did see a slight rise in the MVI, primarily due to large supply coming online in the previous quarter, but with demand remaining strong we expect those vacancies will be absorbed."

"The consistent MPI reading over 50 aligns with the fact that the multifamily market has recovered and will continue to do well," said NAHB Chief Economist David Crowe. "This positive growth is due in part to a strengthening labor market, which has enabled millennials to find jobs and create their own households."

Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.