Multifamily Housing Indices Show Industry in Holding Pattern
 NAHB’s Economics Group, in conjunction with NAHB Multifamily and Public Affairs, has developed a series of quarterly Multifamily Housing Indices (MHI) which will track the multifamily market.  These indices measure present conditions, as well as expectations for the multifamily market during the next 6 months, and use information on both the supply of multifamily housing and the demand for it in the marketplace. 

The indices look at each of the three segments of the multifamily market: Low-rent/affordable, market-rate rental, and for-sale condos/co-ops.  Because these segments behave differently, they are reported on separately.  On the demand side, the indices look at rental vacancies, absorption, changes in rent level and the level of interest from perspective renters.

This information, which  will appear regularly in Market Outlook, debuts in this issue. The table below summarizes the indices.

Supply Indices
 
MHI data covering 4th quarter 2002 shows that builders anticipate little change from the current sluggish level of activity.  The current indices for low-rent and for-sale multifamily starts were both at 51, indicating no change from the previous quarter.  The indices for future expectations (next 6 months) were at about the same level.

The index for market-rate multifamily starts was rated below average (40.97), but builders expect this segment to improve slightly in next 6 months (46.23) (See exhibit 1).

Demand Indices

Multifamily rental indices for occupancy during the 4th quarter of 2002 among Class A apartments (monthly rent greater than $1.20 per sq ft), Class B apartments (monthly rent $0.80 - $1.20 per sq ft), and Class C apartments (monthly rent less than $0.80 per sq ft) all were rated below average at 35.12, 40.24, and 47.21 respectively.  Management companies’ expectations for the next 6 months are more positive.  The index for apartments available for rent was rated high at 64.02, and the index for volume of calls from prospective renters was rated low at 36.61. This shows that the availability of apartments is high while the potential for rental is low.

The index for asking rent was rated at about average (51.22), but the effective rent index (net of concessions) was rated below average at 44.33.

Management companies reported that 62.15% of new apartments were rented within 9 months.  The vacancy rate for apartments during the current quarter was rated at 6.29, slightly higher than during the previous quarter (6.18).

Profile of Respondents

About 40% of the participants in the panel build market-rate multifamily units, 17% build low-rent multifamily units, and 11% build multifamily condos and co-ops.  Another 20% of the participants are apartment management companies, and 4 percent are apartment acquisition/investment companies (See exhibit 2).

For an explanation of the Survey methodology, click here.
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