Continuing Signals of Improvement in the Multifamily Market

With the economy suffering from weak job creation and households focused on improving household finances, a sustained improvement in housing construction will take hold in the multifamily sector before the single-family market. NAHB estimates that there are approximately 2.1 million potential households that constitute pent-up housing demand, and these deferred household formations will emerge as renters before existing renters and first-time homebuyers have a significant impact in the for-sale housing market.

Survey data of multifamily builders are consistent with improving prospects for multifamily construction. The NAHB Multifamily Production Index (MPI) recorded its third consecutive quarter of improvement, reaching a level of 41.7 for the first quarter of 2011. In fact, one of the components of the index, the market-rate rental measure, reached a level of 60.5, the highest reading in five years. As the chart below illustrates, the MPI is a leading indicator of multifamily starts, and the improved scores suggest a strengthening rebound in multifamily activity.

Despite a slight uptick, the NAHB Multifamily Vacancy Index (MVI) has been trending downward since mid-2009, and NAHB expects that trend to continue. Higher readings of the MVI indicate higher vacancy rates.

Taken together, the recent history of these measures of market confidence suggest improved strength in the multifamily market, which should result in higher rents and ultimately increased demand for owner-occupied single-family housing.

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5 Responses to Continuing Signals of Improvement in the Multifamily Market

  1. [...] the ongoing weakness in the labor market and the potential for job creation in the multifamily sector, tax increases on apartment developers would be harmful for economic growth. It would be useful to [...]

  2. [...] Rental Housing Stock Given the increasing focus with respect to growing demand for rental properties, we thought we would present the breakdown of the rental housing stock by structure type. Using the [...]

  3. [...] the increasing focus with respect to growing demand for rental properties, we thought we would present the breakdown of the rental housing stock by structure type. Using the [...]

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