Developer confidence in multifamily production weakened in the third quarter, according to the National Association of Home Builders.
Falling to its lowest reading since the second quarter of 2011, the Multifamily Production Index, which measures construction of low-rent units, market-rate rental units and "for-sale" units, declined 10 points to 46.
"Multifamily production had been quite strong, although it slowed down in the past three months," said NAHB Chief Economist Robert Dietz in a press release. "And with approximately 600,000 units in the pipeline, builders and developers are taking a cautious approach until they see how the market absorbs these units when they come online."
Low-rent units increased by one point to 54, while market-rate rental units and for-sale units both dropped 17 points to 43 and 40, respectively.
"We're starting to see various markets across the country become oversupplied with multifamily construction, so builders and developers are pulling back a bit," said Dan Markson, senior vice president of the NRP Group in San Antonio and chairman of NAHB's Multifamily Council, in a press release.
Multifamily housing units are experiencing increased vacancies, as the NAHB Multifamily Vacancy Index rose three points to 41. The MVI previously peaked at 70 in the second quarter of 2009 and improved considerably afterward. After growing slightly, it has been fairly stable since 2013.
NAHB's MPI tracks both builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0-100, according to the company. A figure greater than 50 signifies that more respondents report conditions are improving than those reporting they are worsening.