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NMHC: Apartment Market Conditions Soften Slightly

Staff Writer |

WASHINGTON — Apartment market conditions weakened a bit in January compared with three months earlier, with three indexes below the breakeven level of 50, according to the National Multifamily Housing Council’s (NMHC) January 2014 Quarterly Survey of Apartment Market Conditions.

The Market Tightness Index fell to 41 from 46, with 56% of respondents reporting unchanged conditions, while 31% say conditions are “looser” than three months ago, according to the NMHC. The index last indicated overall improving conditions in July 2013.

The Sales Volume Index also fell to 41 from 46, marking the third straight quarter that it was below breakeven, NMHC says, adding that half of respondents reported sales volumes were unchanged from three months earlier, while a third reported lower sales in October.

The Debt Financing Index came in at 42, one point higher than October’s index at 41.

“While this level was significantly below the year-ago figure of 74, half of respondents reported unchanged conditions for debt financing,” the NMHC says. “Almost one-third (30%) regarded conditions as worse, in large part due to the rise in interest rates, and the prospect for further increases. Even so, 14% of respondents indicated conditions had improved.”

The Equity Financing Index rebounded to 50 from 39, as 58% of respondents continued to report that the availability of equity financing remains unchanged from three months ago, according to the NMHC. A fifth of respondents (18%), however, believed that financing was more available than three months prior, while 17% felt that financing was less available.

Opinions continue to be mixed regarding the availability of capital for new development, the NMHC adds, with the consensus feeling that debt financing was still “widely available,” but that equity financing was “a bit more constrained.”

“Apartment markets are little changed from October,” says Mark Obrinsky, NMHC’s senior vice president for research and chief economist. “At least half of our respondents to each of our four main questions reported conditions as unchanged from three months earlier. Although markets are a little looser than in October, this is largely seasonal; overall markets remain fairly tight.”

“New supply is finally starting to arrive at levels that will more closely match overall demand,” Obrinsky adds. “In a few markets, we are seeing completions a little higher than absorptions, but this is likely to be short-term in nature. Fundamentally, demand for apartment homes should be strong for the rest of the decade (and beyond), provided only that the economy remains on track.”

The full survey data is available at the NMHC website.

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