According to the National Association of Home Builders latest Multifamily Production Index released this past week, the MPI index dropped seven points to 48 in the first quarter of 2017. The MPI has not had a reading of under 50 since the fourth quarter of 2011.
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 a number above 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. All three components decreased in the first quarter: low-rent units dropped six points to 48, market-rate rental units dipped three points to 55 and for-sale units fell nine points to 43.
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, dropped one point to 41, with lower numbers indicating fewer vacancies. After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011.
"Volatility in the tax credit market is already having a detrimental effect on the production of affordable rental properties, most of which need to be financed with tax credits," said Dan Markson, senior vice president of The NRP Group in San Antonio, Texas, and chairman of NAHB's Multifamily Council. "However, developers of market rate properties in many parts of the country remain reasonably optimistic."
"The drop in the MPI in the first quarter is consistent with NAHB's forecast of a general leveling off of multifamily production activity," said NAHB Chief Economist Robert Dietz. "Going forward, we expect some modest declines, but multifamily production volume will still remain solid."