Housing Downturn Has Upsides for Apartment Industry

By Anuradha Kher, Online News EditorWashington D.C.–The ongoing financial market turmoil and its effects on the broader economy are having varied consequences on the apartment sector, according to the National Multi Housing Council’s (NMHC) latest Quarterly Survey. Although sales volume is down and equity is less available, apartment demand is increasing due to the housing and mortgage market downturn. And there are signs that debt-financing conditions may be stabilizing, the study says.“The apartment industry is clearly benefiting from the downturn in the for-sale housing industry,” notes Mark Obrinsky NMHC chief economist. “While the ‘shadow’ rental market [unsold houses and condos that have left the for-sale market to enter the rental market] may attract some apartment renters [and potential renters], thus far, the lowest homeownership rate in five-and-a-half years seems to have increased demand for apartment residences.”Obrinsky added that overall, the apartment industry remains healthy at this point due to continuing strong fundamentals, and the fact that apartment firms did not overbuild in the latest economic cycle.Almost 80 percent of respondents indicated that tightening mortgage credit has reduced the outflow of renters into homeownership, a small rise from the 75 percent figure of October 2007. More than one-third, however, described the decrease as “big,” up from 22 percent in October and 18 percent last July. The Market Tightness Index, which measures changes in occupancy rates and/or rents, remained below 50 for the second time in 17 quarters, slipping to 33.