The multifamily construction market remains in a state of suspension until oversupply works itself out, as revealed in the latest National Association of Home Builders’ survey report.

The Multifamily Production Index (MPI), which measures how developers feel about current conditions, has not risen above 50 – the breakeven point – since 2Q 2023. In the third quarter this year, confidence dropped for each component of the MPI as well as for the comprehensive MPI itself, which fell from 44 in the previous quarter to 40 in 3Q 2024. Compared to 2Q 2024, the index for garden/low-rise apartments fell from 53 to 48, for mid/high-rise from 29 to 28, for subsidized from 51 to 46, and for built for sale from 38-29.

Such good news as there was in the MPI showed higher indexes in 3Q 2024 compared to the previous year for garden/low-rise, up from 45 to 48, and subsidized apartments, up from 39 to 46. The index for mid-high/rise remained unchanged at 28 and was down from 32 to 29 for built for sale.

All three components of the Multifamily Occupancy Index (MOI) for 3Q 2024 were above the 50-point confidence mark, but all fell year-over-year. So did the overall MOI, which dropped from 82 to 75 this year. On a quarterly basis from 2Q 2024 to 3Q 2024 the garden/low-rise MOI dipped from 82 to 77, the mid/high-rise from 76 to 66. However, the subsidized MOI nudged slightly upward from 85 to 86. The overall MOI for the quarter dropped from 81 to 75.

On a more positive note, the share of respondents who thought overall market conditions were worse in the third quarter fell from 26% to 22%. But so did the share who thought conditions were better, dipping from 12% to 7%. The remainder, 71%, viewed conditions as about the same.

“Demand for rental apartments remains strong enough to support relatively high occupancy rates in existing projects,” said Tom Tomaszewski, chair of NAHB’s Multifamily Council and president of The Annex Group. However, he noted that construction costs, access to and cost of financing, and the availability of land and regulations are roadblocks to new development.

According to Robert Dietz, NAHB’s chief economist, multifamily construction is unlikely to return to long-term trends until the end of 2025.