Sentiment within the multifamily sector moved lower in Q1 2019 versus the prior
quarter and has been on a gradual downtrend since Q1 2018. The NAHB Multifamily
Production Index (MPI), a broad measure of confidence in the multifamily housing
market, decreased seven points in Q1 compared to the previous quarter, reaching
the index’s lowest reading since Q3 2010.1 The Multifamily Vacancy Index (MVI)
moved up three points from the prior quarter and has risen 10 points since Q2 2017.
Consistent with recent softening data, annualized year-over-year apartment price growth has slowed from nearly 13% in mid-2018 to 8.8% as of May 2019.2 However, fundamentals remain broadly intact. New completions and net absorption are very high in metro areas like Charlotte, Austin, Nashville and other (mostly) Sun Belt cities where job growth and new construction have been strong enough to digest a steady influx of new residents.3
The longer-term fundamentals underlying the multifamily market remain relatively positive. Today’s apartment vacancy rate of 6.0% is near the low end of its 20-year range while the MPI remains toward the upper end of its 10-year range.4,1 Broad demographic trends in the U.S. should further support demand through the coming decade. These include exponential growth in demand for senior housing, as the population aged 65 or older in the U.S. is expected to rise from 60 million to 80 million between 2020 and 2040, along with steadily increasing populations of empty nesters and millennials choosing to rent.5,6
1 National Association of Home Builders, http://bit.ly/2WoHpDK.
2 Real Capital Analytics, https://www.rcanalytics.com/chart-us-cppi-slope.
3 Cushman & Wakefield, “What’s Next: U.S. Economic Outlook and Implications for the Property Markets,” April 2019.
4 Reis, as of March 31, 2019.
5 U.S. Census Bureau, https://agingstats.gov.
6 U.S. Census Bureau, American Fact Finder, http://bit.ly/2wEZdLL.
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