Apartment and Condominium Market Improves in Q2, Credit Still a Barrier

The multi-family sector is continuing steadily on its road to recovery and builder sentiments are upbeat about prevailing market conditions.

The Multifamily Production Index (MPI), which measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100, reported that sentiments of builders improved for the eighth consecutive quarter. The report was released by the National Association of Home Builders (NAHB).

The index level rose from 51 in the first quarter to 54 – the highest since the second quarter of 2005, the report said.

However, as the housing sector recovers, many developers feel that they are unable to keep pace with the growing demand, due to insufficient credit.

“The apartment and condo housing sector is continuing on a path of steady recovery as new construction has increased to try to keep up with current consumer demand,” W. Dean Henry, CEO of Legacy Partners Residential in Foster City, Calif., and chairman of NAHB’s Multifamily Leadership Board said in a statement. “However, credit continues to be an issue for many developers around the country, making it difficult to keep pace with this demand.”

Meanwhile, the vacancy rate has increased from the first quarter. The Multifamily Vacancy Index (MVI), which records industry perception of vacancies, increased five points to 36, the report said. Low MVI means fewer vacancies.

“The strength of the MPI suggests that multifamily production is likely to increase somewhat going forward,” NAHB chief economist David Crowe said in a statement. “Multifamily production has already recovered substantially from a historic low of about 110,000 starts a year in 2009 and 2010 to the current annual rate of a little over 200,000.

"However, prior to the downturn multifamily starts remained about 300,000 per year for 12 consecutive years, so there is room for further improvement before apartment and condo production return to normal, sustainable levels.”