Excess Inventory Takes a Toll on Condo Market
Builder confidence in the condominium housing market eroded significantly in the first quarter of 2007, according to the latest results of the Multifamily Condo Market Index (MCMI), which was released by NAHB at the end of last month.
The component of the index tracking current conditions in the condo market stood at 23.1, down nearly 14 points from the same period a year earlier.
"There's heavy excess inventory and now the shakeout in the subprime mortgage market has taken its toll on the for-sale side of the multifamily housing market," said NAHB Chief Economist David Seiders. "The good news is that new supply is being constrained, and that's laying the groundwork for the subsequent recovery."
Seiders noted that many multifamily developers in the process of building for-sale projects have been switching gears and delivering them as rental apartment communities instead.
Builders’ expectations for the condo market in the next six months registered 32.9 on the index, down from 46.0 a year earlier.
A rating of 50 generally indicates that the number of positive responses is about the same as the number of negative responses.
Results of the quarterly MCMI are derived from surveys of multifamily builders and developers nationwide.
On the demand side, multifamily builders said that prospective traffic of condo buyers had increased slightly in the first quarter, registering 38.7 on the index. About 19.7% of those surveyed indicated that they had experienced a higher level of traffic than in the previous quarter.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.