On February 7, 2008, the National Multi Housing Council (NMHC) released its latest Quarterly Survey which shows that the current turmoil in the financial market is having mixed effects on the apartment industry. While it appears that sales volume is down and equity financing is less available, the demand for rental housing is increasing due to the downturn in the mortgage market.
Respondents to the survey answered questions about market conditions, debt financing, sales volume and equity financing. Almost 80 percent of the respondents said that they have seen a decrease in the outflow of renters into homeownership due to the tightening of mortgage credit. Of these, more than one-third (35%) described this decrease as “big”, which is up from 22 percent last quarter and 18 percent in July.
NMHC creates a number of indices from this survey. The Market Tightness Index measures changes in occupancy rates and/or rents and defines a tight market as one with low occupancy rates and high rents. A reading on the index below 50 indicates that markets are loosening and the reading this quarter is 33. However, close to half of the respondents observed no change from last quarter to this quarter.
The Debt Financing Index showed an unexpected improvement from last quarter, increasing from 17 to 45. The number of respondents who thought that borrowing conditions were worsening was cut by almost half, from 76% last quarter to 40% this quarter.
The downturn in the housing market seems to have had the most impact on the volume of property sales. For nine straight quarters, the Sales Volume Index has been below 50, indicating that sales volume is decreasing, although it did increase slightly from last quarter, from 12 to 18. Finally, the Equity Financing Index also increased slightly, from 22 in October to 24 in January, but this is still the second lowest score in the history of this survey, indicating that equity financing is less available.
Respondents to this survey included 102 CEOs and other senior executives of apartment-related firms nationwide who serve on NMHC’s Board of Directors or Advisory Committee. The full survey and results can be found here: www.nmhc.org/Content/ServeContent.cfm?ContentItemID=4487