Apartment Markets Continue Expansion in July NMHC Quarterly Survey
- Jul 24, 2014
Washington, D.C.— Apartment markets continued to expand in the second quarter of 2014, as growth accelerated in all four indexes in the National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The market tightness (68), sales volume (56), equity financing (58) and debt financing (68) indexes all improved from the first quarter this year and marked the second quarter in a row with all above the breakeven level of 50.
“Despite concerns in some quarters about the pace of new development, most markets appear to be absorbing new supply with no downward pressure on rents or vacancies,” says NMHC Senior Vice President of Research and Chief Economist Mark Obrinsky. “The improvement in market tightness was particularly noteworthy. Four years into the apartment industry recovery and expansion, the increase in demand continues to outstrip the pickup in new supply.”
The survey also asked about urban vs. suburban development. Four in ten (43 percent) reported an increased share of urban development relative to suburban in the last six months, compared to one quarter (27 percent) reporting an increased share of suburban development. Of the suburban development taking place, more than half (54 percent) reported more town center-style developments, with 39 percent reporting no appreciable change and 7 percent reporting more garden-style developments. [These results exclude “Don’t know/not applicable.”]
“Early in the recovery, apartment development was concentrated in downtown areas of large cities. While such areas continue to attract investment, new construction is expanding more broadly into suburbs as well. But developers are bringing urban style to suburban locations, with a heavier emphasis on ‘town center’ communities than we’ve seen in the past,” says Obrinsky.
Key findings include:
The Market Tightness Index rose from 56 to 68. The percentage of respondents who saw looser conditions continued to decline, down from 20 percent to 15 percent. While this improvement is partly seasonal, the index is higher than the average for the July quarter since the survey began 15 years ago.
The Sales Volume Index increased slightly from 52 to 54. About half (51 percent) of respondents felt that sales volumes were unchanged from three months earlier; almost one-third of responses (29 percent) reported a higher sales volume, and 16 percent reported a lower number of sales.
The Equity Financing Index rose five points to 58. The majority of respondents (56 percent) continue to report that the availability of equity financing is unchanged from three months ago—similar to the past three quarterly surveys.
The Debt Financing Index increased to 68 from 63. Almost one-third (30 percent) believed that conditions are better, and only 3 percent felt that conditions were worse, a marked decline from January’s Quarterly Survey, when 30 percent felt conditions were worse.