Thursday, July 20, 2017

NMHC: Apartment Market Tightness Index remained negative in July Survey

by Bill McBride on 7/20/2017 03:50:00 PM

From the National Multifamily Housing Council (NMHC): Apartment Markets Decline Slightly in the July NMHC Quarterly Survey

All four indexes of the National Multifamily Housing Council’s (NMHC) July Quarterly Survey of Apartment Market Conditions remained slightly below the breakeven level of 50, the fourth consecutive quarter indicating softening conditions. The Market Tightness (43), Sales Volume (47), Equity Financing (46), and Debt Financing (47) Indexes all improved from April, but still hovered just below 50.

“All four indexes are below 50 but rising, suggesting that the softening is less wide-spread than in previous quarters,” said Mark Obrinsky, NMHC’s SVP of Research and Chief Economist. “Despite some softness at the high end of the apartment market—due to construction having finally ramped up to the level needed—demand for apartments will continue to be substantial for years to come.”
...
The Market Tightness Index edged up from 41 to 43, as almost half of respondents (48 percent) reported unchanged conditions. One-third (33 percent) of respondents saw conditions as looser than three months ago, while the remaining 19 percent reported tighter conditions. This marks the seventh consecutive quarter of overall declining conditions.
emphasis added
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 seventh consecutive quarterly survey indicating looser conditions - it appears supply has caught up with demand - and I expect rent growth to continue to slow.