Thursday, August 04, 2011

NMHC Quarterly Apartment Survey: Market Conditions Tighten

by Bill McBride on 8/04/2011 10:53:00 AM

From the National Multi Housing Council (NMHC): Apartment Sector Continues Across-the-Board Improvement, NMHC Market Conditions Survey Finds

The Market Tightness Index, which examines vacancies and rents, came in at 82, down from a record 90. This is the sixth straight quarter the index has topped 50. Though down slightly from last quarter’s record level, two-thirds of respondents noted tighter markets (lower vacancies and/or higher rents) compared with three months earlier.
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“Demand for apartment residences continues to rise, even as the overall economy remains hampered by the aftermath of the housing bubble,” said NMHC Chief Economist Mark Obrinsky. “For the fifth time in the last six quarters, all four survey measures of market health showed improvement over the prior three months. Markets are tighter, debt and equity capital are more available and sales volume is rising.”
Apartment Tightness Index
Click on graph for larger image in graph gallery.

This graph shows the quarterly Apartment Tightness Index.

The index has indicated tighter market conditions for the last six quarters and although down from the record 90 in April - a reading of 82 is still very strong. A reading above 50 suggests the vacancy rate is falling and / or rents are rising. This data is a survey of large apartment owners only.

This fits with the recent Reis data showing apartment vacancy rates fell in Q2 2011 to 6.0%, down from 6.2% in Q1 2011, and 7.8% in the Q2 2010.

New multi-family construction is one of the few bright spots for the U.S. economy and this survey indicates demand for apartments is still strong.

A final note: This index helped me call the bottom for effective rents (and the top for vacancy rate) over a year ago.