Apartment Industry on the Mend: NMHC Survey

Washington, D.C.--The National Multi Housing Council's latest quarterly survey of market conditions sounds some optimistic notes for the apartment business.

Dees Stribling, Contributing Editor

Washington, D.C.–The National Multi Housing Council’s latest quarterly survey of market conditions sounds some optimistic notes for the apartment business, with everything the survey measures trending positively, sometimes to record levels. Sales volume is up, debt and equity are more available and markets are tighter.

“The strong responses in each of our last two surveys indicate widespread improvement over the last six months,” Mark Obrinsky, NMHC’s chief economist, said in a statement. “Demand for apartment residences has substantially increased thanks to modest improvements in the job market and the continuing decline in homeownership rates.”

Indeed, according to the Housing Vacancy Survey by the U.S. Census Bureau, overall homeownership has declined five years in row. During the second quarter of 2010, the rate was 66.9 percent, compared with 67.4 percent during 2Q09 and a 20-year high of 69.1 percent during the first quarter of 2005.

The NMHC second-quarter 2010 survey’s Debt Financing Index increased dramatically, from 58 to 81, meaning that borrowing conditions have improved. Some 64 percent of respondents said conditions for multifamily borrowing were better during 2Q10 than the first quarter of the year. In fact, the 2Q10 results are the second-highest debt financing figures in the history of the series. Only 3 percent of respondents reported worse conditions.

The survey’s Market Tightness Index, which measures changes in occupancy rates and rents, rose from 81 to 83. Fully, 69 percent of respondents said markets were tighter, meaning lower vacancies or higher rents or both. This was the sixth straight quarter in which this measure has risen, and is the highest figure since July 2006.

The Sales Volume Index increased from 72 to a record-setting 78. Sixty-one percent of respondents indicated sales volume was higher, marking the second consecutive record level in this index, and an indication of widespread improvement in sales, according to NMHC.

The Equity Financing Index increased again from a prior record 71 to a new record 73, indicating that equity financing is more available. Almost half of the respondents–48 percent–indicated that equity financing was more available. This result marked the seventh straight quarter of improvement for this index, notes the NMHC.