Wednesday, April 25, 2018

NMHC: Apartment Market Tightness Index remained negative for Tenth Consecutive Quarter

by Bill McBride on 4/25/2018 02:29:00 PM

From the National Multifamily Housing Council (NMHC): April NMHC Quarterly Survey Shows Greater Supply Improving Affordability

Apartment market conditions were uneven, according to results from the April National Multifamily Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions. The Market Tightness (38), Sales Volume (43) and Debt Financing (36) Indexes landed below the breakeven level of 50, while the Equity Financing Index decreased to 54.

“Apartment markets continue to send mixed signals,” said NMHC Chief Economist Mark Obrinsky. “While respondents indicated more markets are loosening than tightening, this was focused in markets that have experienced greater supply. So, the message is clear, if unsurprising: Increasing supply improves affordability.”

The Market Tightness Index increased two points to 38. This was the tenth consecutive quarter of overall declining conditions. Thirty-eight percent of respondents reported looser market conditions than three months prior, compared to only 14 percent who reported tighter conditions. Meanwhile, nearly half of respondents (47 percent) felt that conditions were no different from last quarter.
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 tenth consecutive quarterly survey indicating looser conditions - it appears supply has caught up with demand - and I expect rent growth to continue to slow.