The National Association of Home Builders (NAHB) released its latest Multifamily Production Index (MPI) yesterday, showing a steady uptick in the apartment and condominium markets that indicate future activity for the markets.
Increasing from 47.3 in the third quarter to 48.9 in the fourth quarter, the MPI increased for the sixth consecutive quarter and is at its highest level since the fourth quarter of 2005.
David Crowe, NAHB’s chief economist, said the rising index is further evidence of housing’s shining star for 2012.
“The apartment and condo sector continues to be a bright spot in the housing market, with the overall index at its highest level in six years,” Crowe said. “The rental components have been the driving force behind the increased index level. And although the for-sale component remains weaker, it is still double what it was just six quarters ago.”
The MPI represents a composite of three measures of multi-family housing – low-rent units, market-rate rental units and “for-sale” units, or condominiums. Individually, from the third to fourth quarter, low-rent units were up to 55.5, market-rate units to 64.3 (an all-time high), and for-sale properties held steady at 30.6. Builder projections for the next six months were even better, where low-rent units were up from 50.2 to 57, market-rate units from 67.2 to 67.8, and for-sale properties from 37.3 to 38.7. As with NAHB’s other indices, a score of 50 or higher represents more builder confidence than pessimism in a given market.
A second multifamily reading, the Multifamily Vacancy Index (MVI), was also positive for the fourth quarter, declining from 35.1 to 34.7 (lower numbers represent fewer vacancies). The MVI has improved the last two quarters, and has fallen dramatically from its Q2 2009 peak of 70.2, as surging demand for multifamily units has created shortages in some markets.
Historically, the MPI and MVI have operated as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.