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Builder Confidence Drops, Again

APARTMENT FINANCE TODAY • January/February 2009

Confidence in the multifamily housing market sagged in the third quarter of 2008, pushing builder confidence indexes for both the condominium and the rental markets to their lowest levels since the National Association of Home Builders (NAHB) created the indexes in 2003.

“We have a serious supply/demand imbalance in the housing market,” said David Seiders, NAHB’s chief economist, in November, before his retirement after more than 20 years at the association.

The part of NAHB’s Multifamily Condo Market Index that tracks confidence in the condo market over the next six months fell to 9.9 in the third quarter of 2008 from 20.8 the year before. The index value for current conditions stood at 8.1, down from 13.5 the same time in 2007. A rating of 50 generally indicates that the number of positive responses is about the same as the number of negative responses.

Rental apartment builders also are concerned. The component of the Multifamily Rental Market Index that gauges confidence in the balance between supply and demand dropped to 22.2 for market-rate apartments from 43.8 the year before. The index of their expectations for supply over the next six months also dropped to 19.1 from 47.1.

Even affordable housing developers were pessimistic. The component of the index that gauges affordable apartment supply dropped to 15.7 from 44.3. The index for supply expectations over the next six months dropped to 20.3 in the third quarter of 2008 from 39.1 in the third quarter of 2007.