Apartment Sector Recovery is Complete

Aug. 2, 2005

NMHC quarterly survey shows improved conditions across the board

For the fourth quarter in a row, senior apartment executives report improvements in four key apartment market indicators - occupancy rates, sales volume, debt, and equity availability - according to the Washington, D.C.-based National Multi Housing Council’s (NMHC) July 2005 Quarterly Survey of Apartment Market Conditions.

“With a record two-thirds of respondents noting tighter market conditions, I think it’s time to say that the apartment market has completed its recovery,” said NMHC Chief Economist Mark Obrinsky. “That’s a significant achievement in the face of two powerful headwinds: the surge in homeownership and the most sluggish job market recovery on record.”

The Survey’s four indexes measure changes in market conditions between April and July. In addition to showing improvements every quarter for the last four quarters, this is only the fifth time in the survey’s 6-year history that all four indexes showed improving conditions.

Highlights of the survey include:

  • The Market Tightness Index, which measures changes in vacancy rates and rents, rose to a record-level high of 80 in July. This is the eighth consecutive quarter that respondents have reported lower vacancy rates and/or higher rents over the last 90 days. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past 3 months.)
  • Already high investor demand for apartments remains unabated. A record 41 percent of respondents noted higher sales volume in their markets over the past 90 days, while a near-record low 9 percent indicated lower volume in their markets. As a result, the Sales Volume Index rose to 66, also a record high, and the ninth straight quarter of increasing sales volume. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past 3 months.)
  • The Equity Financing Index came in at 61, a little below the levels recorded in the previous two quarters, but still an indication of improving availability of equity financing. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past 3 months.) Almost two-thirds of respondents indicated that conditions were unchanged, but 23 percent saw conditions improve, while only 1 percent thought conditions had worsened.
  • The Debt Financing Index was little changed at 53. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past 3 months.) This is the fourth straight quarter of improving conditions (lower rates, greater availability, or both) for mortgage finance. Sixty percent felt that conditions had not changed from 3 months earlier; a good sign given the already-favorable conditions in the mortgage finance markets.

The July 2005 Quarterly Survey was conducted July 18 through July 25, 2005. Eighty-eight CEOs and other senior executives of apartment-related firms nationwide who serve on NMHC's Board of Directors or Advisory Committee responded. Full survey results are posted at (www.nmhc.org/content/Servecontent.cfm?contentItemID=3506).

This information was reprinted with permission from the National Multi Housing Council (NMHC). Based in Washington, D.C., NMHC is a national association representing the interests of the larger and most prominent apartment firms in the United States. NMHC's members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers, and financiers. Nearly one-third of Americans rent their housing, and almost one in five Americans lives in an apartment. For more information, contact NMHC at (202) 974-2300, e-mail the Council at ([email protected]), or visit NMHC's website at (www.nmhc.org).

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