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Apartment Markets Dip in Third-Quarter NMHC Survey

Staff Writer |

WASHINGTON — All four indexes of the National Multi Housing Council’s (NMHC) October Survey of Apartment Market conditions fell below 50 for the first time since July 2009, the NMHC reports.

“After four years of almost continuous improvement across all indicators, apartment markets have taken a small step back,” says Mark Obrinsky, NMHC vice president of research and chief economist. “Conditions cannot continue to improve indefinitely and new development is at least somewhat constrained by available capital—though more on the equity than the debt side.”

“Even so, both the Market Tightness and Sales Volume Index are within hailing distance of the breakeven level and the Debt Financing Index rose despite some rise in interest rates,” adds Obrinsky. “This bodes well for the apartment industry going forward.”

The Market Tightness index fell from 55 to 46, with 67% of respondents seeing no change in market tightness (higher rents and/or occupancy rates) compared to three months ago, says the NMHC. A fifth of respondents felt that markets were looser than three months ago, while 13% saw tighter markets.

The Equity Financing Index also dipped in the third quarter, down to 39, with 60% viewing equity financing as unchanged, marking the “10th consecutive quarter in which the most common response was that equity finance conditions were unchanged from three months ago,” the NMHC says. In contrast, 27% of respondents say conditions are less available, while 5% view equity financing as more available, the council adds.

The Sales Volume Index remained at 46, with 32% of respondents seeing a lower number of property sales, compared to 24% who say sales volume is unchanged. A plurality of 44% regarded sales volume as unchanged, according to NHMC.

The Debt Financing Index rose 21 points to 41, with 22% of respondents saying conditions are better now than three months ago, a “sizable increase” from 8% last quarter, the NMHC says.

“Forty-one percent of respondents believed now is a worse time to borrow, down from 67% in July,” the NMHC adds.

Opinions regarding the availability of capital for new development are mixed, according to the NMHC, with a total of 77% of respondents believing construction debt financing is widely available—34% think both equity and debt financing are widely available, while 43% think construction loans are widely available, but equity capital for new development is constrained.

Thirty-six percent think equity capital is widely available, the NMHC adds.

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