Builder confidence in the market for new multifamily housing was mixed during the third quarter, according to results from the Multifamily Market Survey (MMS) released by the National Association of Home Builders (NAHB).
The MMS produces two separate indices: The Multifamily Production Index had a reading of 38 (the break-even point for this index is 50) and the Multifamily Occupancy Index (MOI) reading was 82 (on a scale of 1 to 100).
“High operating costs are creating problems for existing properties, especially affordable properties, and the cost and reduced availability of credit is making it difficult to finance new projects,” said Lance Swank, president and CEO of Sterling Group, Inc. in Mishawaka, Indiana, and chairman of NAHB’s Multifamily Council. “It should also be noted that the garden/low-rise market is doing much better than the mid/high-rise market, both in terms of construction and occupancy rates.”
Regarding Swank’s latter point, the NAHB Home Building Geography Index found the share of apartments built in core counties of large metros has fallen from 41.7% to 37.4% over the last three and half years. In contrast, the share of apartments built in small metros, suburbs and rural markets increased from 31.3% to 35.6% during the same period.
“The relatively weak MPI is consistent with the declining production levels seen in the second half of 2023 and NAHB’s projection that they will be lower still in 2024,” said NAHB Chief Economist Robert Dietz. “Surveys by both NAHB and the Fed indicate that cost and availability of credit for builders and developers has become a major headwind for new construction.”
