U.S. Apartment Industry Shows Widespread Improvement
Market Tightness Improving, Jobs Still Key to Recovery
Sales volume is up, debt and equity are more available and markets are tighter, according to respondents. For the first time since October 2005, all four survey indexes recorded better market conditions than three months ago. Indexes for both sales volume and equity financing registered all-time highs. The biggest improvement came in market tightness, which jumped from 38 to 81.
There is clear improvement in apartment market conditions on all fronts, said NMHC Chief Economist Mark Obrinsky. We saw a sharp increase in the Market Tightness Index, which fits with the surprisingly strong (for a seasonally weak period) effective rent growth. And the all-time highs recorded by the sales volume and equity financing indexes offer even more reason for optimism.
Even so, a sustained recovery in the apartment market needs a firm economic and demographic foundation. While the long-term prospects for the industry are bright, in the near-term the industryӢs prospects still depend upon a stronger rebound in both the job market and household formation.
Key findings include (for all four indexes, figures above 50 indicate improving market conditions):
The Market Tightness Index, which measures changes in occupancy rates and/or rents, rose sharply from 38 to 81. This was the highest figure in nearly four years. Fully 64 percent of respondents said markets were tighter (meaning lower vacancies and/or higher rents). Only two percent reported looser markets. This is the sixth straight increase for this measure.
The Sales Volume Index increased to a record-setting 72 from 56. Forty-eight percent of respondents indicated sales volume was higher. This is the highest ever reported and represents a nearly complete reversal from a year ago, when 43 percent said it was lower.
The Equity Financing Index increased further from 66 to a record 71, indicating that equity financing is more available. Nearly half indicated that equity financing was more available; another record. Only three percent thought equity financing was less available. This is the sixth consecutive quarter this index has improved.
The Debt Financing Index also increased, from 49 to 58, meaning borrowing conditions have improved. Eighteen percent said conditions for multifamily borrowing were better this quarter; nearly 80 percent indicated that borrowing conditions were unchanged. Only two percent said conditions were worse.
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