All four indexes in the January 2015 National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions fell below the break-even level of 50, indicating a decline over the past quarter. The last time Market Tightness (47), Sales Volume (46), Equity Financing (46) and Debt Financing (37) all landed below 50 was in October 2013.
“After an incredible year for the apartment industry, some weakening has appeared reflecting seasonal patterns along with additional pullback in some markets,” says Mark Obrinsky, NMHC’s senior vice president of research and chief economist.
“2015 was one for the record books. Construction of new apartments rose to the highest level in almost 30 years, while the occupancy rate continued to climb and rent growth accelerated,” says Obrinsky. “All signs point to continued strong demand for apartment residences. With new supply finally approaching the level needed to meet new demand, we may well see some moderation in both occupancy and rent growth.”
Consumer demand for apartments declined slightly, with the Market Tightness Index coming in at 47 from 53 last quarter. This marks the first time in two years that the index showed a contraction from the previous quarter.
The Sales Volume Index also fell, dropping from 53 to 46, indicating a smaller transaction volume from the previous quarter. Similarly, the Equity Financing Index showed a small decline by falling six points to 46. Nearly two-thirds (64 percent) of respondents reported that the availability of equity financing remained unchanged from three months ago.
After rising 19 points in Q3, the Debt Financing Index declined 17 points to 37.While almost one-third (32 percent) reported declining borrowing conditions, only 6 percent felt conditions were better.
The Quarterly Survey special question asked about year-to-year rent growth. Slightly over half (51 percent) of respondents indicated asking rents of Class A and B apartments were 3.0–4.9 percent higher than one year ago. One-quarter of respondents reported asking rents significantly higher (5.0 percent or greater), while 18 percent thought rents were up by 0.0–2.9 percent from one year ago. Only 4 percent noted rents lower today than a year ago in the markets they operate.
About the Survey:
The January 2015 Quarterly Survey of Apartment Market Conditions was conducted January 4-January 11, 2016; 147 CEOs and other senior executives of apartment-related firms nationwide responded.