Pandemic Concerns Weaken Multifamily Builder and Developer Confidence
Confidence in the market for new multifamily housing weakened significantly in the first quarter of 2020, according to results from the Multifamily Market Survey (MMS) released today by NAHB. The survey was conducted during the first part of April, when many of the effects of the pandemic had become apparent.
The MMS produces two separate indices:
- Multifamily Production Index (MPI) fell 22 points to 27 compared to the previous quarter, which is the lowest reading since the fourth quarter of 2009.
- Multifamily Vacancy Index (MVI) rose 19 points to 59, with higher numbers indicating more vacancies.
The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. A number below 50 indicates that more respondents report conditions are getting worse than report conditions are improving.
The MPI is a weighted average of three key elements of the multifamily housing market:
- low-rent units — apartments that are supported by low-income tax credits or other government subsidy programs;
- market-rate rental units — apartments that are built to be rented at the price the market will hold; and
- for-sale units — condominiums.
All three components declined in the first quarter:
- Low-rent units fell 21 points to 32.
- Market-rate rental units dropped 21 points to 29.
- For-sale units decreased 24 points to 22.
The MVI measures the multifamily housing industry’s perception of vacancies in existing apartments. It is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, where a number over 50 indicates more property managers believe vacancies are increasing than decreasing. With a reading of 59, this is the highest reading since the fourth quarter of 2009. “Leading up to the coronavirus pandemic, demand for apartments had been solid and development processes were normal,” said Barry Kahn, president of Hettig-Kahn Holdings in Houston and 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.”
“Like other sectors of the housing market, the multifamily market has been greatly affected by the effects of the pandemic,” said NAHB Chief Economist Robert Dietz. “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.”
Historically, the MPI and MVI have performed well 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.
For data tables on the MPI and MVI, visit nahb.org/mms.
Latest from NAHBNow
Jun 20, 2025
The New American Home 2026: Innovation Meets ImpactThe New American Home 2026, the official show home of the 2026 NAHB International Builders’ Show® in Orlando, is already drawing industry buzz for its distinctive design and rare structural features.
Jun 19, 2025
Award-Winning Advice: Surround Yourself With Good PeopleIn the latest edition of Pro Remodeler, 2024 Remodeler of the Year Mike Pressgrove shares advice from his career.
Latest Economic News
Jun 20, 2025
Single-family Construction Loan Volume GrowsCredit conditions for builders and developers eased in the first quarter of 2025 as the level of outstanding 1-4 family residential construction loans rose for the first time in two years, according to data released by FDIC.
Jun 18, 2025
The Fed Pause ContinuesReflecting most forecasters’ expectations for the June FOMC meeting, the Federal Reserve continued its post-2024 pause for federal funds rate cuts, retaining a target rate of 4.5% to 4.25%.
Jun 18, 2025
Sharp Drop in Multifamily Production Brings Overall Housing Starts DownA sharp decline in multifamily production pushed overall housing starts down in May, while single-family output was essentially flat due to economic and tariff uncertainty along with elevated interest rates.