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Tuesday, April 29, 2014

NMHC Survey: Apartment Market Conditions Tighter in April 2014

by Calculated Risk on 4/29/2014 12:04:00 PM

From the National Multi Housing Council (NMHC): Overbuilding Overblown? Apartment Markets Expand in April NMHC Quarterly Survey

Apartment markets rebounded from a soft January, with all four indexes above the breakeven level of 50 in the latest National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. Last year’s concerns of overbuilding or lack of capital have largely eased, reflected in market tightness (56), sales volume (52), equity financing (53) and debt financing (63) all above 50 for the first time since April 2013.

“Supply appears to have ramped up enough to meet approximate ongoing demand with few, if any, signs of irrational exuberance,” said NMHC Senior Vice President of Research and Chief Economist Mark Obrinsky. “A handful of submarkets are facing a temporary surge in new deliveries that may put downward pressure on occupancy rates or rent growth. However, increased development costs could well keep a lid on new supply.”
The Market Tightness Index rose from 41 to 56. Almost half (47 percent) of respondents reported unchanged conditions, and approximately one-third (32 percent) saw conditions as tighter than three months ago, in contrast with January’s survey, where almost one-third saw conditions as looser than three months ago. This is the first time the index has indicated overall improving conditions since July 2013.
emphasis added
Apartment Tightness Index
Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. The quarterly increase was small, but indicates tighter market conditions.  

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 survey has been bouncing around 50 - and now suggests vacancy rates might be close to a bottom.