Both indices of the Multifamily Market Survey are down in the second quarter. The results from the National Association of Home Builders show the Multifamily Production Index (MPI) declined 12 points year-over-year to a level of 44; the Multifamily Occupancy Index (MOI) dropped eight points to a reading of 81.
A reading below 50 represents more respondents reporting worsening conditions, while a reading over 50 represents more favorable conditions. The MPI measures confidence during the current production cycle in the apartment and condo sectors: Gardens and low-rise, mid- and high-rise, and subsidized; and for-sale condos. Despite all four components witnessing a decline year-over-year, gardens and low-rises and subsidized units were both in positive territory with a score over 50.
“Multifamily developers are less optimistic than they were at this time last year,” said Tom Tomaszewski, Chairman of NAHB’s Multifamily Council, in a release. “Some are struggling with particular local regulations, but the main reason it’s difficult to get projects started is high interest rates.”
The MOI measures the same components of the MPI minus the for-sale condos, and all three rental segments saw a decline. Gardens and low-rises and subsidized units remained above 80, while mid- and high-rises slipped into the 70s.
“There is no doubt that interest costs and limited financing availability are making it difficult to develop multifamily properties,” said NAHB Chief Economist Robert Dietz in the release. “However, financial markets may become more stable later in the year, as recent weak economic data make it more likely the Fed will cut interest rates.”