Builder Confidence In Multifamily Market Drops

Builder confidence in the market for new multifamily housing plummeted in the first quarter of 2020, according to a survey released Thursday by the National Association of Home Builders.

The Mutlifamily Production Index – which measures builder and developer attitudes about the apartment and condo market – fell to 27, down 22 points from the previous quarter. The index is on a scale of 0 to 100, with a number below 50 indicating that more respondents believe conditions are getting worse than those reporting conditions are improving.

The index is at its lowest level since the fourth quarter of 2009.

“Like other sectors of the housing market, the multifamily market has been greatly affected by the effects of the pandemic,” NAHB Chief Economist Robert Dietz said. “On a positive note, while multifamily construction has slowed significantly in the spring, rent revenue is coming in above some market participants’ expectations from a few months ago.”

The Multifamily Vacancy Index – which measures vacancies – rose 19 points in the quarter to 59. Higher numbers mean more vacancies.

“Leading up to the coronavirus pandemic, demand for apartments had been solid and development processes were normal,” said Barry Kahn, president of Hettig-Kahn Holdings in Houston and chairman of NAHB’s Multifamily Council. “Now, we are seeing a lot of disruption in the market as builders and developers are trying to navigate the impacts on operations and collections, permitting, inspections and financing.”