March 21, 2011
Nation's Building News

The Official Online Newspaper of NAHB

Multifamily Housing
Multifamily Developers See Favorable Signs in Last Year’s Fourth Quarter

Two quarterly indices from NAHB show improving market conditions for both new and existing apartment and condominium buildings in the final quarter of last year.

The Multifamily Production Index (MPI), which tracks the views of developers on new construction, rose five points in the fourth quarter to 40.8 — its highest level since the fourth quarter of 2006.

A component of the index tracking developers' perceptions of market-rate rental properties was at 51.7. This was the first time this MPI component rose above the level of 50 since the second quarter of 2007. 

On the scale of 1 to 100 used for the index and its components, any number over 50 indicates that more respondents reported conditions were improving than reported conditions were getting worse.

Also providing grounds for optimism, the Multifamily Vacancy Index (MVI) in the final three months of last year declined to 33.3, its lowest level since the third quarter of 2006 and half of what it was a year and a half ago. Smaller numbers on this index indicate fewer vacancies.

Historically, the MPI and MVI have been leading indicators of U.S. Census figures for multifamily starts and vacancy rates one to three quarters in advance of those statistics.

"The renewed optimism evident in this index indicates that developers are beginning to increase production in order to meet pent-up demand," said NAHB Chief Economist David Crowe. "However, the lack of construction financing is constraining their ability to do so at levels sufficient to meet that demand."

"Apartment developers are happy to be back in the business of building new rental apartment homes,” said Charles Brindell, chairman of NAHB's Multifamily Leadership Board and chairman and CEO of Mill Creek Residential Trust.

“The lack of adequate new supply, however, will put inflationary pressure on apartment rents for the next few years," Brindell said. "We are already seeing increasing rents in several markets across the country."

To see the Fourth Quarter 2010 Multifamily Market Index, visit

For information on multifamily resources available from NAHB, e-mail Erin Grant, or call her at 800-368-5242 x8557.

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