Tuesday, October 28, 2014

NMHC Survey: Apartment Market Conditions Slightly Tighter in Q3 2014

by Calculated Risk on 10/28/2014 02:16:00 PM

From the National Multi Housing Council (NMHC): Apartment Markets Expand Further in October NMHC Quarterly Survey

For the third quarter in a row, apartment markets expanded across all four areas of the National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. Market tightness (52), sales volume (58), equity financing (54) and debt financing (71) indexes all remained above 50 – indicating growth from the previous quarter.

“The apartment markets are still firing on all cylinders,” said Mark Obrinsky, NMHC’s SVP of Research and Chief Economist. “Demand for apartment residences is still strong enough to offset the gradually rising level of new apartment deliveries. Even with occupancy rates at high levels, markets got just a bit tighter in the last three months."

The survey also asked about apartment demand from demographics beyond the core mid-to-late twenties set. One in five (22 percent) reported a significant increase in the number of Baby Boomers among their residents. A similar share (21 percent) indicated a significant increase in “forty-somethings” in their properties. A smaller share of respondents reported increases among single parents (13 percent) and married couples with children (4 percent).

“Young people still make up a disproportionate share of apartment renters. But now we’re starting to see growing segment of baby boomers attracted to apartment living,” said Obrinsky.
The Market Tightness Index fell from 68 to 52. Slightly more than half (52 percent) of respondents reported unchanged conditions. Approximately one-quarter (26 percent) saw conditions as tighter than three months ago, a decrease from July’s survey, where half saw conditions as tighter than three months ago. Looser conditions were reported by 22 percent of respondents, a slight uptick from July’s 15 percent.
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. This indicates slightly tighter market conditions in Q3.

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.  The apartment market is still solid.