Friday, January 25, 2019

NMHC: Apartment Market Tightness Index remained negative for 13th Consecutive Quarter

by Calculated Risk on 1/25/2019 03:53:00 PM

The National Multifamily Housing Council (NMHC) released their January report: January NMHC Quarterly Survey Shows Little Overall Change

Apartment market conditions were mixed in the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions for January. The Market Tightness (46) and Equity Financing (50) indexes showed little change in those conditions from October, while the Debt Financing Index (59) showed improving conditions. By contrast, the Sales Volume Index (33) showed further slowing in property sales.

Notably, a significant majority of respondents found that recent tariffs have driven up costs across the board and in a variety of markets throughout the country. "While the four indexes each changed somewhat over the last quarter, overall market conditions remained fairly static. Debt market financing conditions improved somewhat over the last three months," said NMHC Chief Economist Mark Obrinsky. "By contrast equity market financing conditions are little changed, as considerable capital continues to seek investment in the apartment sector."

The Market Tightness Index increased from 41 to 46. Less than one-quarter (22 percent) of respondents reported looser market conditions than three months prior, compared to 13 percent who reported tighter conditions. Nearly two-thirds (64 percent) of respondents felt that conditions were no different from last quarter.
This index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010. And it also helped me call the bottom in vacancy rate more recently.

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.

This is the thirteenth consecutive quarterly survey indicating looser conditions - it appears supply has caught up with demand - and I expect rent growth to continue to slow.