Builders report fewer multifamily starts
Coronavirus-distressed builders and developers saw multifamily market conditions worsen in the first quarter, according to the National Association of Home Builders (NAHB).
“Leading up to the coronavirus pandemic, demand for apartments had been solid, and development processes were normal,” said Barry Kahn, chairman of NAHB’s Multifamily Council. “Now, we are seeing a lot of disruption in the market as builders and developers are trying to navigate the impacts on operations and collections, permitting, inspections, and financing.”
NAHB's Multifamily Production Index (MPI), which is a measure of builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100, plunged 22 points to 27 quarter over quarter. The decline marked the index's lowest reading since Q4 2009, indicating that more respondents see conditions getting worse.
All three components of the MPI reported decreases in the first quarter: the component measuring construction of low-rent units dived 21 points to 32, the component gauging market-rate rental units declined 21 points to 29, and the component measuring for-sale units moved down 24 points to 22.
Meanwhile, a rise in the Multifamily Vacancy Index (MVI) suggested that more property managers believe vacancies are increasing than decreasing. The index jumped 19 points to 59 in the first quarter, its highest reading since the fourth quarter of 2009.
“Like other sectors of the housing market, the multifamily market has been greatly affected by the effects of the pandemic,” NAHB Chief Economist Robert Dietz said. “On a positive note, while multifamily construction has slowed significantly in the spring, rent revenue is coming in above some market participants’ expectations from a few months ago.”
