Apartment Markets Continue to Strengthen Says National Multi Housing Council
Quarterly Survey
Sales Volume Continues to Decline
WASHINGTON, Aug. 7 -- Apartment markets continue their
upward trajectory, according to the National Multi Housing Council's July
2006 Quarterly Survey of Apartment Market Conditions. Fully 75 percent of
the respondents reported tighter market conditions over the prior three
months, measured by lower vacancy rates, higher rents or both.
As a result, the survey's Market Tightness Index increased slightly
this quarter (May to July), to 85, now the second highest index number on
record. (An index reading above 50 indicates that, on balance, conditions
are improving; a reading below 50 indicates that conditions are worsening;
and a reading of 50 indicates that conditions are unchanged.) The Market
Tightness Index has been 80 or above for five consecutive quarters, and
above 50 for 12 consecutive quarters, signaling a significant improvement
in demand for rental housing. In contrast, the Index was 45 in July 2003
and 39 in July 2002, during the peak of the recession.
Despite improving market conditions, sales activity continues to slow
from the record-level of transactions conducted in 2005. A mere six percent
of all respondents reported higher sales volume this quarter than last, and
42 percent reported lower sales. The Sales Volume Index declined slightly
from 35 to 32, the lowest since January 2002, and down from a high of 66 in
July 2005.
The Equity Financing Index remained at 50, indicating that equal shares
of respondents (in this case, 11 percent) gauged equity financing was
either less or more available. But nearly three-quarters of respondents
thought the availability of equity financing had not changed from the
previous quarter.
Finally, despite steadily rising interest rates, the Debt Financing
Index actually increased from 21 to 29 this quarter. The number of
respondents saying that now is a worse time to borrow dropped from 69
percent last quarter to 16 percent this quarter. The vast majority, 71
percent, report that conditions are unchanged. This suggests that even
though conditions for borrowing are not ideal, they are not getting worse.
"Improving rental demand in the face of rising interest rates and
declining sales volume attests to the strong outlook for the apartment
sector," noted Doug Bibby, NMHC's President. "According to Harvard
University's 2006 State of the Nation's Housing report, the number of
renter households rose in 2005 for the first time in years. The report goes
on to say that as echo boomers, same-age immigrants and second-generation
Americans move into adulthood, demographic forces will favor rental housing
over for-sale housing."
Full survey results are posted at
http://www.nmhc.org/Content/ServeContent.cfm?ContentItemID=3945. The July 2006
quarterly survey was conducted July 24-31, 2006. Sixty-five CEOs and other
senior executives of apartment-related firms nationwide who serve on NMHC's
Board of Directors or Advisory Committee responded. The April 2006
quarterly survey was conducted April 24-May 1, 2006; 75 responded. The July
2005 quarterly survey was conducted July 18-25, 2005; 88 responded.
Based in Washington, DC, NMHC is a national association representing
the interests of the larger and most prominent apartment firms in the U.S.
NMHC's members are the principal officers of firms engaged in all aspects
of the apartment industry, including owners, developers, managers and
financiers. Nearly one-third of Americans rent their housing, and almost 14
percent live in a rental apartment. For more information, contact NMHC at
202/974-2300, e-mail the Council at info@nmhc.org, or visit NMHC's web site
at http://www.nmhc.org.
