Market Tightness, Sales Volume, Equity Financing and Debt Financing all showed declining conditions compared to the previous quarter.
Still, there’s reason for investors to remain optimistic. After four years of almost continuous improvement across all indicators, apartment markets have taken a small step back, said Mark Obrinsky, NMHCs 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. This bodes well for the apartment industry going forward.
Opinions in the survey were mixed regarding the availability of capital for new development. A total of 77 percent of respondents regarded construction debt financing as widely available, 34 percent think both equity and debt financing are widely available, while 43 percent think construction loans are widely available but equity capital for new development is constrained. Only 36 percent think equity capital is widely available.
Market Tightness Index fell to 46 from 55. Two-thirds of respondents saw no change in market tightness — higher rents or occupancy rates — compared with three months ago.
Almost one-third of respondents saw a lower number of property sales, compared with almost one-quarter who said sales volume was unchanged. A plurality of 44 percent regarded sales volume as unchanged.
The Equity Financing Index dipped to 39. Sixty percent viewed equity financing as unchanged. This was the tenth consecutive quarter in which the most common response was that equity finance conditions were unchanged from three months ago. By comparison, 27 percent of respondents viewed conditions as less available and only 5 percent viewed equity financing as more available.
NMHC’s Debt Financing Index rose 21 points to 41. Almost one quarter of respondents viewed conditions as better from three months ago, a sizable increase from eight percent last quarter. Forty-one percent of respondents believed now is a worse time to borrow, down from 67 percent in July.
You can view the full survey data here.
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