Apartment and condo developers were gloomier about new construction in the third quarter than a year earlier, and property owners were less upbeat about filling their buildings. Those are the findings of the National Association of Home Builders’ quarterly Multifamily Market Survey, released Nov. 5.
NAHB’s Multifamily Production Index (MPI), which measures developer sentiment about conditions for new multifamily starts, was 41, five points lower than a year earlier. The Multifamily Occupancy Index (MOI), which measures how owners see occupancy in existing rental apartments, was 69, also down five points.
Both are diffusion indexes on a 0-to-100 scale. A reading above 50 means more respondents call conditions good than poor. So developers on balance rate conditions for starting new projects as poor, while owners still rate occupancy as good, though less good than a year ago.
Every production segment below 50
All four parts of the production index fell from a year earlier and are below 50, according to the full report:
- Garden and low-rise rentals fell five points to 46.
- Mid- and high-rise rentals fell four points to 33.
- Subsidized rentals fell six points to 49.
- Built-for-sale condominiums fell four points to 31.
Garden and low-rise product carries half the weight in the index, and it has now dropped below the break-even line. NAHB’s table shows the segment at 51 a year earlier and at 48 in each of the first two quarters of 2026. The overall MPI has slipped every quarter this year, from 44 in the first quarter to 43 in the second and 41 now. That is the lowest reading since the third quarter of 2024, when it was 40.
Kip Lewis, director of construction management at OCCH in Columbus, Ohio, and chairman of NAHB’s Multifamily Council, cited “rising interest rates, construction costs that are high relative to rents, and problems getting projects approved and connected to roads and utilities.” He added: “As a result, many projects are taking longer to complete.”
NAHB chief economist Robert Dietz said “it is not surprising that the MPI is down year-over-year given supply-side headwinds such as high interest rates and a rising rental vacancy rate.” He said NAHB’s 2027 forecast “shows a decline for multifamily starts.” He also said that although the administration’s regulatory reform efforts “are helping to ease some cost pressures,” the sector “would still benefit from an expedited permit process and lower rates on development and construction loans.”
Occupancy gauge back at its low
The occupancy index fell back to 69 after rising to 74 in the second quarter. That matches the first-quarter 2026 reading as the lowest in the series table NAHB published, which begins in the third quarter of 2023. Two of its three parts fell from a year earlier. Garden and low-rise dropped six points to 70, and mid- and high-rise fell seven points to 59. Subsidized units rose two points to 83. All three stayed above 50.
Dietz listed “a rising rental vacancy rate” among the headwinds. The softer occupancy reading also fits the rent picture elsewhere. Single-family landlord AMH, for example, reported this week that new-lease rent growth slowed to 0.1% in October.
Same direction as other industry surveys
The NAHB results line up with the National Multifamily Housing Council’s recent surveys. Its quarterly construction survey found that 29% of apartment developers started fewer projects last quarter. Its October apartment survey found that 17% of executives facing maturing loans see possible foreclosures.
Developers in NAHB’s survey do not see conditions changing much in the short term. Asked to compare the market with three months earlier, 66% said it was about the same, 28% said worse and 6% said better.
The sample is small. NAHB sent the third-quarter survey to 1,290 multifamily developers and got 55 responses. Because the survey was redesigned in 2023 and there is not yet enough history to seasonally adjust it, NAHB says the indexes should be compared only year over year, not quarter to quarter. The quarter-to-quarter moves cited above come from NAHB’s published table and should be read with that caution.
On our reading, for investors and lenders watching the apartment pipeline, the survey points the same way as NAHB’s forecast and the NMHC data: fewer new starts going into 2027 and occupancy that has stopped improving. More coverage of the sector is on our commercial real estate page.
