Confidence of Condo Builders Is on the Rise
Condo builders reported somewhat better market conditions in the fourth quarter of 2006 than in the previous quarter, according to the latest results of the NAHB Multifamily Condo Market Index (MCMI) released on March 2.
While the component of the index gauging current conditions remained substantially lower than it was a year earlier, builders and developers were more optimistic about prospects for the condo market six months out and reported some slight improvement in the traffic of prospective buyers from the previous quarter.
"The condo market is coming back toward balance following the previous four quarters when the pendulum swung from red-hot to seriously cold," said NAHB Chief Economist David Seiders. "What we are looking for — and likely to find in 2007 — is a healthy and sustainable level of condo production that will fall short of the unsustainable levels registered during the earlier boom period, but that will meet current market demands."
The component of the MCMI that tracks current condo market conditions registered 29.6 on the index in last year’s closing quarter, compared to 47.1 during the fourth quarter of 2005; that component hit bottom during the third quarter of 2006, at 19.7.
The index measuring builder sentiment about condo market conditions over the next six months rose to 49.1 — the highest seen since the last quarter of 2005.
A rating of 50 on the quarterly index, which is based on a survey of multifamily builders and developers, indicates an equal number of positive and negative responses. Below 50 is negative and above positive.
Responding to a special set of questions on insurance costs for multifamily developers, more than 70% of those polled for the fourth quarter of 2006 reported an increase in property insurance premiums over the preceding 12 months. There were significant regional differences across regions, with increases reported by 38% in the Northeast, 43% in the Midwest, 78% in the West and 84% in the South.
Among the developers who reported higher premiums, just over 50% reported an increase ranging from 1% to 24%; 18% cited increases between 25% and 49%; and 3% said their increase was 50% or higher.
Such increases can have a serious impact on affordability, especially in areas being rebuilt following the hurricane damage inflicted in 2005.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.