Housing Crises Causes Slowdown in Rental Market

By Anuradha Kher, Online News EditorWashington, D.C.–Builder confidence in the rental apartment market sagged in the fourth quarter of 2007, according to the results of the Multifamily Rental Market Index (MRMI) recently released by the National Association of Home Builders (NAHB).“The housing market is undergoing a significant correction and that is also affecting the multifamily market for rent and for sale,” says David Seiders NAHB chief economist. “The excess inventory has to be absorbed in order to restore balance to the housing markets.” The MRMI is derived from a quarterly survey of multifamily builders and developers, which rates their responses on a scale of 0 to 100. A rating of 50 generally indicates that the number of positive responses is about the same as the number of negative responses. The components of the index that track current supply conditions for market-rate and lower rent apartments stood at 40.0 and 45.3, respectively, in the fourth quarter of 2007, down from 59.8 and 48.7 the same time a year ago. This shows that multifamily builders could be trying to rein in new supply as much as possible.In questions about expectations for the next six months, builder confidence remained weak, with the component of the index for market rate apartments standing at 50.0, and for lower-rent apartments at 48.9 in the fourth quarter of last year, down from 69.5 and 59.5 at the same time the year before.As the number of calls from prospective renters slowed, incentives and concessions were being used to shore up demand, according to survey respondents. As a result, the component of the index that tracks net rents dropped sharply, down from 61.3 in the fourth quarter of 2006 to 47.5 for the fourth quarter of 2007.  Although not as optimistic as last year at this time, builders do expect conditions in the apartment market to improve. For the fourth quarter of 2007, the components of the index gauging expectations for demand over the next six months stayed at 50 or above: Class A stood at 50.0; Class B at 53.9; and Class C at 61.1.