Developers and project owners have conflicting views about the current state of the multifamily market, according to a survey from the National Association of Home Builders (NAHB).
The association’s multifamily market fourth-quarter 2024 survey found that respondents generally feel slightly negative about construction in the multifamily market. However, the industry’s perception of occupancies in existing apartments is positive.
The survey creates two separate indexes on the multifamily market. One gauges the attitude of builders and developers on the overall market and the other measures the industry’s perception of occupancies in existing properties. The indexes are scaled to from 0 to 100, with any score above 50 indicating a positive outlook and any score below 50 indicating a negative outlook.
The survey found that while the multifamily production index (MPI) increased seven points to 48 year over year, the survey still showed a negative outlook for construction in the sector because it was below the break-even point of 50.
The MPI is a weighted average of three built-to-rent markets (low rise, mid/high rise, and subsidized units) and one built-for-sale market (condominiums). The low-rise units component increased one point to 52, the mid/high-rise units component jumped 13 points to 39 and the subsidized units rose 11 points to 52. The component measuring condominiums dropped one point to 42.
The multifamily occupancy index (MOI), which measures the industry’s perception of occupancies in existing apartments, was much more positive. The low-rise units component rose one point to 81. The mid/high-rise units component rose 10 points to 74, and the subsidized-units component was up three points 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.”
NAHB Chief Economist Robert Dietz said the NAHB is 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.
