Sentiment improved year-over-year, but challenges remain for high-rise and condo segments
Developer confidence in the multifamily housing sector saw a modest uptick in the third quarter, according to the latest Multifamily Market Survey (MMS) from the National Association of Home Builders (NAHB).
The Multifamily Production Index (MPI) rose to 46, up six points from a year earlier, but still below the neutral threshold of 50. It means that most developers still saw conditions as poor rather than good.
Meanwhile, the Multifamily Occupancy Index (MOI) dipped one point year-over-year to 74, its lowest level in nearly three years, though still firmly in positive territory.
The MPI, which tracks builder and developer sentiment across four key market segments, revealed a mixed landscape. Garden and low-rise projects climbed three points to 51, marking the only segment in positive territory.
“We are seeing a degree of bifurcation in the multifamily market, as developers of low-rise market-rate and subsidized rental properties express increased optimism, while developers of mid- and high-rise properties and condominiums remain less confident,” said Debra Guerrero, senior vice president of strategic partnerships and government affairs at The NRP Group and chairman of NAHB’s Multifamily Council.
She added, “Significant challenges such as the current regulatory environment, rising construction costs and difficulties in securing project financing continue to affect the multifamily sector as a whole.”
Mid- and high-rise units saw a sharper nine-point gain to 37, but sentiment remained negative. The subsidized segment jumped nine points to 55, while the built-for-sale (condominium) market increased six points to 35.
“The MPI and MOI are giving us a mixed picture of the multifamily market, with strength in some market segments, but weakness concentrated in the mid-to-high-rise developments that tend to be common in high-density metro areas,” said NAHB chief economist Robert Dietz.
He noted that NAHB’s Home Building Geography Index pointed to growth in less densely populated regions, while larger metros lagged.
On the occupancy side, garden/low-rise units slipped one point to 76, mid/high-rise units held at 66, and subsidized units dropped five points to 81. Despite the overall positive reading, the MOI’s decline marked the lowest sentiment for occupancy in 11 quarters.
Broader industry trends show developers grappling with persistent regulatory hurdles, elevated construction costs, and tighter financing conditions. While 10% of survey respondents said the market improved over the past three months, 22% reported a decline, and 68% saw little change.
The MMS was redesigned in 2023, and NAHB cautioned that results should be compared year-over-year until more data is available for seasonal adjustment.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
