by Key builder surveys in the segment are down compared to the same period last year
WASHINGTON — Typically, we report on home construction and builder confidence for single-family homes, as they are a key driver of home furnishings spending.
But we also are taking notice of the rental market as that also drives the need for new furniture albeit perhaps on a smaller scale and perhaps fewer pieces given the size of apartments and other rentals.
That said, we recently came across another survey worth noting from the National Association of Home Builders that looks at builder confidence in the multifamily house market.
According to the Nov. 5 Multifamily Market Survey report, builder confidence in this segment weakened during the third quarter in two key areas, the Multifamily Production Index and the Multifamily Occupancy Index. The MPI was down five points to 41 year over year, and the MOI also was down five points to 69.
Any reading over 50 indicates that more respondents view conditions as good versus poor, and any reading under 50 assumes the opposite.
According to the report, the MPI is based on builder and developer sentiment about current production conditions for the apartment and condo market and is a weighted average of four key market segments including three in the built-for-rent market and one in the built-for-sale market that includes condominiums.
It said the component for built-for-sale units dropped four points to 31 and the other three segments for garden low-rise rentals fell five points to 46, the component measuring mid/high-rise units fell four points to 33, and the component measuring subsidized units fell six points to 49.
Meanwhile, the MOI is a weighted average of three built-for-rent market segments including garden/low-rise, mid/high-rise and subsidized. The report said that while these all were above the break-even point of 50, the component measuring garden/low-rise units fell six points to 70, the component measuring mid/high-rise units fell seven points to 59, and the component measuring subsidized units rose two points to 83.
“Developer sentiment about new multifamily production has definitely softened, due to challenges such as rising interest rates, construction costs that are high relative to rents, and problems getting projects approved and connected to roads and utilities,” said Kip Lewis, director of construction management at OCCH in Columbus, Ohio, and chairman of NAHB’s Multifamily Council. “As a result, many projects are taking longer to complete.”
NAHB Chief Economist Robert Dietz said it was no surprise the MPI is down from last year based on issues such as high interest rates and rising rental vacancy rates.
“Due to the headwinds still facing the industry, NAHB’s 2027 forecast shows a decline for multifamily starts,” he said. “And although the administration’s regulatory reform efforts are helping to ease some cost pressures, the multifamily sector would still benefit from an expedited permit process and lower rates on development and construction loans.”
What this means for the industry remains unclear as people will continue to move in and out of existing multifamily properties as the need arises. That means these consumers will still need furniture.
Yet based on data from the U.S. Census Bureau, growth of new apartments and other multifamily units has slowed in the past few years based on the number of units completed as well as those under construction. If construction continues to slow for the balance of the year and heading into 2027, it could mean less incentive for people to move and buy new furniture for these properties.
While the sale of new and existing single-family homes drives much of the market, multifamily construction is also important and a segment we will continue to watch.
