Multifamily construction is expected to continue to slow in the first six months of the year, with a possible pickup in the second half, according to a survey of its members by the National Association of Home Builders (NAHB).
The findings returned a score of 48 on its Multifamily Production Index (MPI), indicating that builders’ confidence in the market remained below the breakeven point of 50, which would encourage them to consider building again. This was the sixth consecutive quarter since 3Q 2023 when the MPI failed to rise to 50 or above.
“An MPI below 50 is what we would expect given that multifamily starts declined in both 2023 and 2024,” said NAHB chief economist Robert Dietz.
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In contrast, the NAHB’s Multifamily Occupancy Index (MOI) climbed to 81, up four points year over year. It measures the industry’s perception of occupancies in existing apartments. The higher score indicates existing owners are positive about occupancy. However, high operating costs remain a problem.
Each of the three segments of the MOI scored higher year-over-year. The score for mid/high-rise units rose 10 points to 74, subsidized units by three points to 91, and garden/low-rise units by one point to 81.
The good news for the MPI was that even though it failed to rise overall above 50 in 4Q 2024, its scores for all segments of the market were higher than in 3Q 2024. Indeed, its figures for garden/low-rise apartments and subsidized housing, which each reached 52, were higher than breakeven. However, its low scores for mid/high-rise apartments (39) and built-for-sale condos (42) brought the overall MPI down to 48.
“Multifamily developers are slightly less pessimistic than they were at this time last year, but supply-chain problems and high interest rates remain serious barriers to a stronger market,” stated Tom Tomaszewski, chair of NAHB’s multifamily council.
The report projected that the industry in the second half of the year would be supported by a low national unemployment rate that would help it stabilize.
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