The deepening recession and ongoing credit crunch continue to drag down builder confidence in many sectors of the construction industry. According to the latest results of the Multifamily Rental Market Index (MRMI) and Multifamily Condo Market Index (MCMI), released recently by the National Association of Home Builders (NAHB), Washington, D.C., the multifamily housing market is no exception.
“Job losses and tightening credit continue to depress current and future multifamily construction,” says David Crowe, NAHB's chief economist. “Without job growth as a demand driver for rental apartments, new construction is declining — and without access to credit, the pipeline for future construction is running dry.”
The component of the MRMI that gauges supply conditions sank deeply in the fourth quarter of 2008, down to 22.4 for affordable apartments and 18.6 for market rate apartments, compared to 45.3 and 40.0, respectively, from the same time a year ago. On the condo side, the supply component fell 11 points from the fourth quarter of 2007, to hit a record low of 7.8 .
NAHB's Multifamily Market Indexes are derived from quarterly surveys of multifamily builders and developers in which they rank their perceptions of the current conditions and expectations for the near future as “good,” “fair,” or “poor.” Responses are used to create a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.
Looking ahead six months, builders and developers are only slightly less pessimistic: The MRMI component tracking builder expectations for the supply of affordable rentals stood at 28.6, down from 48.9 in the fourth quarter of 2007. Market-rate rentals (at 22.5) were less than half the level of 50 at the same time a year ago. On the MCMI, the index gauging expectations for condo supply stood at 13, down from 29.2 in the fourth quarter of 2007.