Apartment Market Conditions Stabalizing, But Not Improving, According To NMHC Quarterly Survey
WASHINGTON, DC - The apartment market continues to struggle, but shows early signs of possibly stabilizing, according to the National Multi Housing Council's latest Quarterly Survey of Apartment Market Conditions.
All four of the survey's market indexes covering occupancy, sales volume, equity finance and debt finance remained below 50 (indicating conditions were worse than three months ago), but three of the four increased from the last quarter, with only the debt index recording a decline.
"Apartment demand remains tethered to an economy that continues to shed jobs at a fairly rapid pace," noted NMHC Chief Economist Mark Obrinsky. "Financing is beginning to stabilize, but the market is still a long way from 'normal'."
"The survey also suggests that transaction activity is mainly being restrained by uncertainty in apartment property values-whether they have 'bottomed out'-and not financing constraints. Only when this uncertainty fades are we likely to see a significant upturn in apartment transactions."
Fears of future property value declines are behind the difficulty apartment firms are having in obtaining equity financing. In a special survey question, 67 percent of respondents said potentially falling property values best explained the lack of equity availability.
Another 13 percent pointed to deteriorating apartment market conditions resulting from the economic downturn; seven percent said lower leverage required by lenders has reduced expected returns; and three percent said lower leverage means the same equity capital supports fewer transactions. Several respondents commented that all of these conditions contribute collectively to the challenges in obtaining equity finance.