Thursday, July 23, 2020

NMHC: "July Apartment Market Conditions Showed Continued Impact of COVID-19 Outbreak"

by Calculated Risk on 7/23/2020 03:30:00 PM

The National Multifamily Housing Council (NMHC) released their July report: July Apartment Market Conditions Showed Continued Impact of COVID-19 Outbreak

Apartment market conditions weakened in the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions for July 2020, as the industry continues to cope with the ongoing COVID-19 pandemic. The Market Tightness (19), Sales Volume (18) and Equity Financing (34) indexes all came in well below the breakeven level (50). However, in a positive sign, the index for Debt Financing (60) signaled improving conditions.
>br ? “Recent spikes in COVID-19 cases have caused many areas of the U.S. to scale back or completely reverse their attempts at reopening their local economy. As a result, unemployment levels stand elevated in double digits as much of the nation’s business activity remains temporarily shuttered,” noted NMHC Chief Economist Mark Obrinsky. “Amidst this COVID economy, 71 percent of respondents reported looser market conditions this quarter compared to the prior three months, marking the second consecutive quarter of deteriorating conditions.”

“The Federal Reserve has countered this economic malaise with aggressively accommodative monetary policy, resulting in historically low interest rates. This, in turn, has created favorable pricing for debt financing, leading more respondents than not (44% to 25%) in this round of the survey to report improving conditions for borrowing. Nevertheless, these improved financing conditions have been largely confined to stabilized multifamily assets, and underwriting standards remain fairly stringent.”
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The Market Tightness Index increased from 12 to 19, indicating looser market conditions. The majority (71 percent) of respondents reported looser market conditions than three months prior, compared to 8 percent who reported tighter conditions. One in five respondents (21 percent) felt that conditions were no different from last quarter.
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 July in April due to COVID.