Thursday, April 21, 2016

NMHC: Apartment Market Tightness Index declined in April Survey

by Bill McBride on 4/21/2016 03:50:00 PM

From the National Multifamily Housing Council (NMHC): Apartment Markets Mixed in the April NMHC Quarterly Survey

Apartment markets appeared mixed in the April 2016 National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions, with two of four indexes landing below the breakeven level of 50. The Market Tightness (43) and Equity Financing (45) indexes showed declining conditions for the second quarter in a row, while Sales Volume (53) and Debt Financing (50) indicated improving and steady conditions, respectively.

We continue to see some softening in the market relative to one of the strongest runs in recent memory for the apartment industry,” said Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist. “As new apartment construction catches up with demand, we expect to see moderation from record rent growth as well as more selectivity from equity and debt financing sources.”

Consumer demand for apartments declined in the Market Tightness Index, dropping four points to 43. After seven quarters reporting tighter conditions, this marks the second quarter indicating a looser market.
Apartment Tightness Index
Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading below 50 indicates looser conditions from the previous quarter. This indicates market conditions were looser over the last quarter.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

This is the second consecutive month of looser conditions - it appears supply has caught up with demand - and I expect rent growth to slow (the vacancy rate is also starting to increase).