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Improvement in the multi-family housing market continues, according to the National Association of Home Builders (NAHB), which compiles a quarterly Multifamily Production Index (MPI). The index recorded its third consecutive increase in the first three months of 2011, according to the NAHB, moving from 40.8 in the fourth quarter of 2010 to 41.7 in the first quarter of 2011.
The MPI tracks multi-family housing industry sentiment on a scale of 0 to 100.
The index is based on three key elements: 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.
"Multi-family continues to be one of the brighter spots in housing," said NAHB chief economist David Crowe. "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 multi-family 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."
The Multifamily Vacancy Index (MVI), which measures the multi-family housing industry's perception of vacancies, increased slightly from 33.3 in the fourth quarter of last year to 35.0 in the first quarter of 2011. With the MVI, lower numbers indicate fewer vacancies.