The industry is stable despite faltering builder confidence
Multifamily builders and developers reported generally stable market conditions in the second quarter of 2022, although it’s a mixed bag as to how the economic slowdown will affect the sector for the rest of the year.
The Multifamily Production Index, which measures builder confidence in the market for new multifamily housing, fell to 42 in the second quarter, down six points from the first quarter. According to the National Association of Home Builders (NAHB), the for-sale condo sector mainly dragged down the index. NAHB’s Multifamily Occupancy Index (MOI) posted an eight-point decline, down to 60 in Q2.
Despite the drop, overall rental demand remains solid as occupancy rates continue to improve, NAHB Multifamily Council chairman Sean Kelly said.
Read more: Commercial and multifamily markets post double-digit gains
“With rising interest rates and high construction costs, multifamily developers need to be cautious given recession concerns,” said NAHB chief economist Robert Dietz. “However, the multifamily market is showing growth this year, with 5+ unit permits and starts up 18% on a year-to-date basis.”
“Rising mortgage interest rates mean low vacancy in multifamily rental,” Kelly added. “Additionally, recent Treasury guidance related to American Rescue Plan funding creates clarity in the production pipeline for apartments supported by the Low-Income Housing Tax Credit.”
Two of the three MPI components tumbled quarter over the quarter: The component measuring low-rent units dropped four points to 45, and the component measuring for-sale units declined 11 points to 33. Meanwhile, the component measuring market rate apartments climbed by three points to 52.
