Multifamily Builder Confidence Rallies From Record Lows
Recent hints of optimism in the housing industry appear to have spread to the multifamily sector in this year’s first quarter, according to the latest results of the Multifamily Rental Market Index (MRMI) and the Multifamily Condo Market Index (MCMI), which were released on May 25 by NAHB.
“Multifamily builders are beginning to see slight improvement in the current market for new rental and for-sale units, and anticipate even better times in the next six months,” said NAHB Chief Economist David Crowe. “The components of the index measuring customer interest rose significantly; the index level of calls from prospective renters rose 14 points, to 50.9, and the index reflecting the traffic of prospective condo buyers jumped 25 points.”
Index components gauging conditions for current production remained low earlier this year, but two of them — measuring low-rent units and for-sale units — increased from the fourth quarter of 2008. The former climbed nearly four points to 26.3; and the latter reached 14.5 after languishing in the single digits for the second half of last year.
NAHB’s Multifamily Market Indexes are derived from quarterly surveys of multifamily builders and developers in which they rank their perceptions of current conditions and expectations for the future. On a scale of 0 to 100, a level of 50 generally indicates that the number of positive and negative responses is about equal.
The near future appears more promising to builders than at any time since the first quarter of 2008. Builder expectations for starts of affordable rentals six months from now hit 38.1; market rate rentals were at 31.1, and for-sale units rose nearly 13 points to hit 25.4.
While rental vacancy rates remain high — dropping slightly from 8.7% in the fourth quarter of 2008 to 8.5% in the first quarter of 2009 — they were significantly higher, at 10.3%, in the first quarter of last year.
The component of the index gauging calls from prospective renters rose to 50.9 in the first three months of this year, after falling into the high 30s during the second half of 2008. Condo traffic accelerated from the mid-teens in the previous two quarters to 39.3 in this year’s first quarter, down only slightly from the 40.2 level recorded in the first quarter of 2008 — possibly in response to the $8,000 first-time buyer tax credit included in the economic stimulus package.
“The stock of existing homes for rent and for sale is greater than the consumer demand right now, and is in direct competition with new supply,” said Crowe. “As that inventory is absorbed, and as new households form during the economic recovery, the demand for multifamily rentals will rise, and production will return to a more ‘normal’ level.”
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.