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Demand for Apartments Remains Hot in July

Mortgage News Ticker
Jul 28, 2015
Apartment Complex Pic

Consumer demand for rental apartments remained strong while the market for apartment properties stayed relatively unchanged in the latest National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The market tightness, sales volume and equity finance indexes all remained near or above the break-even level of 50, while the debt-financing index fell to 35. For the survey’s special question, only 15 percent of respondents indicated that their apartment homes directly competed with single-family rentals.

“NMHC’s survey provides solid evidence that despite the strong pickup in new apartment construction this year, demand for rental housing is even stronger,” said Mark Obrinsky, NMHC’s SVP of Research and Chief Economist. “Interestingly, most apartment properties see little competition from single-family rental homes, mainly because apartments tend to serve different demographic groups. Other survey respondents noted that single-family rentals are generally located in different neighborhoods than most apartments. The decline in the debt financing index is significant. In large part, it reflects two things: The modest rise in interest rates and tightening initiated by Freddie Mac and Fannie Mae as they began to approach their lending volume caps. Regulator action to keep multifamily mortgage finance flowing has averted a crisis, but lending conditions remain somewhat tighter.”

Key findings include:

►The Market Tightness Index edged up from 58 to 61. This marks the sixth consecutive quarter of improving conditions.

The Sales Volume Index showed improving conditions for the second straight quarter, rising by one point to 53.

The Equity Financing Index fell six points to 49. This is the first time the index registered below 50 since October 2013.

The Debt Financing Index declined significantly to 35 from 60. The index fell below 50 for the first time since January 2014.

Most respondents indicated apartments don’t compete very much with single-family rental homes. The majority of respondents (62 percent) indicated that apartments serve different demographic groups than single-family rentals. Another 22 percent responded that apartments and single-family rental homes are largely in different neighborhoods. Only 15 percent thought their properties were in direct competition with single-family rentals.

The July 2015 Quarterly Survey of Apartment Market Conditions was conducted July 13-20; 123 CEOs and other senior executives of apartment-related firms nationwide responded.

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