Debt and equity are more available than last quarter and markets are tighter. The Sales Volume Index registered an all-time high.The apartment market continues to gather strength, said NMHC Chief Economist Mark Obrinsky. Just 15 months ago, apartment demand was still falling, sales were declining, equity finance was getting harder or more costly to find and debt finance was still worsening. In the last nine months, all four areas have been improving dramatically. Indeed, the strong responses in each of our last three quarterly surveys indicate widespread improvement throughout 2010.While demand for apartment residences and apartment properties is still below the peak levels seen in the last decade, the further shift from owning to renting may well add to apartment demand in the near-term, while population growth and a rebound in household formation should strengthen demand over the longer term, Obrinsky continued. But at some point, economic growth will have to shift into a higher gear for the apartment industry to see conditions continue to register improvements of this level.
Key findings include (for all four indexes, figures above 50 indicate improving market conditions):
The Sales Volume Index increased from 78 to a record high of 84. Seventy-one percent of respondents indicated sales volume was higher than three months ago. This was the fifth consecutive quarter this index has been above 50, an indication of widespread improvement.
For the year this index averaged 73, the highest on record.
The Debt Financing Index increased slightly, from 81 to 82, the second-highest debt financing figure in the history of the series. This means borrowing conditions have improved. A full 64 percent of respondents said conditions for multifamily borrowing were better this quarter. For the first time ever in the history of the survey not a single respondent said conditions were worse.
For the year this index averaged 68, the second highest on record.
The Equity Financing Index decreased slightly from a record 73 to 70. Because the score is well above 50, this indicates that equity financing is more available. Forty-three percent indicated that equity financing was more available; this is the fifth quarter in a row where more respondents said equity finance conditions were improving.
For the year this index averaged 70, also a record.
The Market Tightness Index, which measures changes in occupancy rates and/or rents, decreased from 83 to 77, but remained well above the break-even mark of 50. Sixty percent of respondents said markets were tighter, meaning lower vacancies and/or higher rents.
For the year this index averaged 70, the highest since 2006.
Full survey results are posted at www.nmhc.org/goto/quarterlysurvey.
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