NAHB Reports Optimistic Outlook for Multifamily Development Mar 11, 2011

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Two quarterly indices from the U.S. National Association of Home Builders (NAHB) indicate a return to healthy market conditions for new and existing apartment and condominium buildings.

The Multifamily Production Index rose 5 points from the previous quarter to 40.8, its highest number since the fourth quarter of 2006. The MPI tracks developer sentiment about new construction on a scale of 1 to 100.

NAHB reported that its Multifamily Vacancy Index (MVI) shows similar reason for optimism, declining to 33.3 (smaller numbers indicate fewer vacancies). This is its smallest number since the third quarter of 2006, and half of its level a year and a half ago.

NAHB said the MPI and MVI have historically 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.

“The renewed optimism evident in this index indicates that developers are beginning to increase production in order to meet pent-up demand,” said NAHB Chief Economist David Crowe. “However, the lack of construction financing constrains their ability to do so at levels sufficient to meet that demand.”

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