Developers' Confidence in Multifamily Slipping

February 28, 2014

Developer sentiment about current conditions in the apartment and condo markets showed signs of weakening in the fourth quarter of 2013, according to the National Association of Home Builders' Multifamily Production Index. 

The index measures developer sentiment on a scale of 0 to 100. A number above 50 indicates conditions as improving, while below 50 indicates conditions are worsening. In the fourth quarter of 2013, the index declined four points to 50, but the reading has been at 50 or above for the past eight readings. 

A component on the index that tracks builder and developer perceptions of market-rate rental properties has been performing the strongest, remaining above 50 for 13 consecutive quarters, according to NAHB. That component, however, did fall four points to 60 in the fourth quarter of 2013.

An index measuring the multifamily housing industry’s perception of vacancies fell two points to 38. A lower number indicates there are fewer vacancies. After peaking at 70 in the second quarter of 2009, the vacancy measure steadily improved through 2010. It’s remained fairly stable since 2011, NAHB notes. 

NAHB has forecasted an uptick in the production of new apartments in 2014, but at a slower pace than last year. 

Source: “Developer Confidence in Multifamily Market Shows Slight Decline in Fourth Quarter,” National Association of Home Builders (Feb. 27, 2014)

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