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NAHB: Multifamily demand remains strong despite supply issues

Tight supply and pent-up demand are keeping developers, builders and managers optimistic

According to the National Association of Home Builders, demand for multifamily product remains strong and builders/developers feel positive about the production conditions.

Today, NAHB released its quarterly Multifamily Market Survey.  The survey yields two indices Multifamily Production Index and Multifamily Vacancy Index. Both are measured against quarterly U.S. Census data on multifamily starts and vacancies.

According to NAHB’s report, the MPI is unchanged from last quarter at 53, and the MVI was also virtually unchanged at 43.

What this means is that developers and builders feel that production conditions are slightly above neutral and getting better, while property managers feel that vacancy is improving aka, demand is strong.

"The stability of multifamily builder confidence is consistent with NAHB's view that the market has reached a healthy, sustainable level of production," NAHB Chief Economist Robert Dietz said in a statement.

"The overall strong economy is supporting demand and balancing supply-side issues many builders are facing, including shortages of labor and buildable lots, and the recent surge in lumber prices," he added.

According to the indices, the next six months will see an in increase in low-rent, market-rate and for sale production as builders’ and developers’ reports resulted in MPIs of 58, 57 and 50, respectively. That is an increase in expected production over last quarter where those same numbers were 55, 48 and 50. 

NAHB Multifamily Production Index

(Courtesy of NAHB)

In terms of the vacancy, the next six months look stable as property managers’ reports yielded MVIs of 52 for Class-A properties, 41 for Class-B properties and 35 for Class-C properties. This is the same as last quarters six-month prediction with the exception of Class-C properties which was 40 last quarter. This means that vacancy is expected to increase for Class-A properties, decrease for Class-B properties and significantly decrease for Class-C. These results reflect current trends multifamily trends like the dearth of affordable supply and slightly overbuilt Class-A market.

NAHB Multifamily Vacancy Index

"Multifamily builders and developers are reporting solid demand around the country, as shown in the vacancy rate for the first quarter," Steve Lawson, president of The Lawson Companies and chairman of NAHB's Multifamily Council, said in a statement.

"We anticipate steady demand through the rest of the year as household formations continue to grow."

 

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