Multifamily Developer Confidence Dips in 2Q24

Overall, multifamily homebuilders grew more pessimistic in Q2, as reported in Globest. According to a survey conducted by the National Association of Home Builders (NAHB), confidence in both production conditions and occupancy has declined.

By The Numbers

The Multifamily Production Index (MPI), which gauges builder and developer sentiment regarding current conditions in the apartment and condo market, fell to a score of 44 in 2Q24. 

This marks a 12-point drop from the previous year and a 3-point decline from 1Q24, indicating that more respondents view market conditions as poor rather than positive.

Meanwhile, the Multifamily Occupancy Index (MOI), which measures opinions on occupancy, clocked in at 81, or an 8-point drop from 2Q23 and two points below 1Q24.

Segment Analysis

The most significant drop within the MPI was observed in the mid/high-rise segment, where the index fell from 36 to 29, indicating severe challenges. Other segments, like garden/low-rise, subsidized housing, and built-for-sale units, also saw slight declines, each dropping by 1 point.

In contrast, occupancy in mid/high-rise apartments showed a slight improvement, with the MOI for this segment rising by 2 points to 76 between Q1 and Q2 this year. However, occupancy in other categories fell during the same period.

What’s Next

The downturn in production sentiment is largely attributed to high interest rates, which have made it difficult for developers to initiate new projects. 

Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council, noted that while some developers face challenges due to local regulations, high borrowing costs remain the primary obstacle to growth in the sector.