Economy Watch: U.S. Apartment Market Uneven in Q1

The U.S. apartment market is sending mixed signals, according to the latest NMHC Quarterly Survey of Apartment Market Conditions.
Source April National Multifamily Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions

The apartment market continues to show signs of softening, according to the April National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions, which was released on Wednesday. Three of the four indexes calculated by the survey (Market Tightness, Sales Volume and Debt Financing) were all below the breakeven level of 50, while the Equity Financing Index decreased to 54. The survey asked 130 CEOs and other senior executives of apartment-related firms nationwide about market conditions.

“Apartment markets continue to send mixed signals,” said NMHC Chief Economist Mark Obrinsky. “While respondents indicated more markets are loosening than tightening, this was focused in markets that have experienced greater supply. So, the message is clear, if unsurprising: Increasing supply improves affordability.”

The Market Tightness Index increased two points to 38. Thirty-eight percent of respondents reported looser market conditions than in fourth-quarter 2017, compared to only 14 percent who reported tighter conditions. Meanwhile, nearly half of respondents (47 percent) felt that conditions were no different from last quarter.

The Sales Volume Index increased from 40 to 43. Nearly a third of respondents (32 percent) reported lower sales volume than the three months before. Only 18 percent noted higher volume, while the remaining 48 percent reported unchanged sales volume.

The Equity Financing Index decreased from 58 to 54, with the index indicating overall improving conditions for the second straight quarter. While most respondents (60 percent) reported unchanged conditions in the equity market, 17 percent thought that equity financing was more available than in fourth-quarter 2017. Just 9 percent of respondents believed equity financing was less available.

The Debt Financing Index declined from 38 to 36. Over a third of respondents (37 percent) reported worse conditions for debt financing compared to the last quarter of 2017. Ten percent of respondents said that conditions for debt financing had become more favorable, while close to a half (44 percent) reporting unchanged conditions.