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Multifamily developers are feeling less confident in the market for new builds as high interest rates lead to difficult lending conditions.
The National Association of Home Builders’ Multifamily Market Survey, which is made up of two distinct surveys, found that the Multifamily Production Index had a score of 47 out of 100, down three points year over year. The Multifamily Occupancy Index, which gauges the sentiments of owners of existing apartment buildings, moved up one point to 83, signaling that demand for apartments remains high, according to data released Thursday for the first quarter.
“Multifamily developers are concerned about higher interest rates for construction and development loans and tighter lending conditions that are taking place in the market right now,” said Tom Tomaszewski, president of The Annex Group and chairman of NAHB’s Multifamily Council. “There are also many areas across the country where developers are having a difficult time getting their projects approved.”
And while the occupancy index remains high, that could change as more of the in-progress construction of rental units finishes up and more apartments become available.
“Owners of existing apartments continue to report strong occupancy, but this has the potential to soften when more of the 900,000-plus apartments currently under construction come online,” NAHB Chief Economist Robert Dietz said in a statement. “NAHB is currently projecting that multifamily starts will fall 28 percent this year as developer activity slows.”
The occupancy index is graded out of 100, with a score above 50 indicating a positive attitude.
The Multifamily Production Index measures four segments of the market: three in the built-for-rent market and one in the built-for-sale (condominium) market. All four components posted year-over-year declines, with the component measuring mid/high rise units falling five points to 36, the component measuring subsidized units falling one point to 50, and the index measuring built-f0r-sale units falling three points to 39.
