Saturday, August 07, 2010

NMHC Quarterly Survey: Apartment Market Conditions Tighten

by Bill McBride on 8/07/2010 11:41:00 AM

From the National Multi Housing Council (NMHC): Widespread Improvement Continues for Apartment Industry, According to NMHC Quarterly Survey of Market Conditions

The Market Tightness Index, which measures changes in occupancy rates and/or rents, rose from 81 to 83. Fully 69 percent of respondents said markets were tighter (meaning lower vacancies and/or higher rents). This was the sixth straight quarter in which this measure has risen, and is the highest figure since July 2006.
...
“Demand for apartment residences has substantially increased thanks to modest improvements in the jobs market and the continuing decline in homeownership rates. ... Going forward, the near-term outlook for the apartment industry is likely to be tied to the pace of job growth,” [said NMHC Chief Economist Mark Obrinsky]
Apartment Tightness Index
Click on graph for larger image in new window.

This graph shows the quarterly Apartment Tightness Index.

The index has increased for six straight quarters, but only has indicated tighter market conditions for the last two quarters (from very weak conditions).

A reading above 50 suggests the vacancy rate is falling. Based on limited historical data, I think this index will lead reported apartment rents by about 6 months to 1 year.

Also this data is a survey of large apartment owners only. The data released in late July from the Census Bureau showed the rental vacancy rate was steady in Q2 for all rental units in all areas.

A final note: The results of this survey are a little surprising, but it does suggest the rental market might have bottomed - at least for now. I've heard from a couple of sources that effective rents have risen slightly over the first half of 2010 at some large apartment complexes. Just something to be aware of ... (I've posted about this before).