Multifamily sector continues as housing’s brightest light

The National Association of Home Builders’ quarterly Multifamily Production Index (MPI) recorded its third consecutive quarterly increase in the first three months of 2011 indicating continuing improvement in the multifamily housing market.

The MPI, which tracks multifamily housing industry sentiment about the strength of the market on a scale of 0 to 100, increased from 40.8 in the fourth quarter of 2010 to 41.7 in the first quarter of 2011.

The index provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, construction of market-rate-rent units, and construction of “for sale” units.

The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

“Multifamily continues to be one of the brighter spots in housing,” said David Crowe, NAHB chief economist. “Not only is the overall index on the rise, the market-rate rental component has improved dramatically. In the first quarter, the market-rate rental component was 60.5, the highest level in more than five years.”

Although the increase is cause for optimism, the multifamily market still faces significant challenges, Crowe said.

“There is considerable pent-up demand, but the ongoing crisis in funding for new construction means that developers are limited in their ability to meet that demand.”