Multifamily Developer Confidence Reflected Mixed Results in the Fourth Quarter

Confidence in the market for new multifamily housing reflected mixed results year-over-year in the fourth quarter, according to the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two separate indices. While the Multifamily Production Index (MPI) increased seven points to 48 year-over-year, it is still below the break-even point of 50. The Multifamily Occupancy Index (MOI) had a reading of 81, up four points year-over-year.

The MPI measures builder and developer sentiment about current production conditions in the apartment and condo market on a scale of 0 to 100. The index and all its components are scaled so that a number below 50 indicates that more respondents report conditions are poor than report conditions are good.

The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise and subsidized) and one in the built-for-sale (or condominium) market. Three of the four components increased year-over-year: the component measuring garden/low-rise increased one point to 52, the component measuring mid/high-rise units increased 13 points to 39, the component measuring subsidized units rose 11 points to 52 and the component measuring built-for-sale units posted a one-point decline to 42.

The MOI measures the multifamily housing industry’s perception of occupancies in existing apartments on a scale of 0 to 100. The index and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it is poor. The reading of 81 indicates existing apartment owners are positive about occupancy.

The MOI is a weighted average of three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized). All three components remain solidly in positive territory above 50: the component measuring garden/low-rise units increased one point to 81, the component measuring mid/high-rise units rose 10 points to 74 and the component measuring subsidized units posted a three-point increase to 91.

“Multifamily developers are slightly less pessimistic than they were at this time last year, but supply-chain problems and high interest rates remain serious barriers to a stronger market,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council. “Occupancy rates for owners of rental properties have remained solid, although they are struggling with high operating costs.”

“An MPI below 50 is what we would expect given that multifamily starts declined in both 2023 and 2024,” said NAHB Chief Economist Robert Dietz. “We are projecting that multifamily construction will decline again in the first half of 2025 before stabilizing toward the end of the year, with the industry supported by a low national unemployment rate.”

The MMS was re-designed last year to produce results that are easier to interpret and consistent with the proven format of other NAHB industry sentiment surveys. Until there are enough data to seasonally adjust the series, changes in the MMS indices should only be evaluated on a year-over-year basis.

For additional information on the MMS, visit nahb.org/mms.

For more information on the NAHB Multifamily program, please visit NAHB Multifamily.