Market Conditions Improve For Apartment Industry
Fifth consecutive quarter of uninterrupted growth; Market still lacks widespread capital

By Jim Lapides

WASHINGTON, D.C. — Optimism continues for the apartment industry, according to the latest results of the National Multi Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The findings reflect a gradual recovery for the multifamily sector that faced a 50-year low in apartment starts in 2009.

The Q1 2012 survey’s four indexes measuring Market Tightness (74), Sales Volume (57), Equity Financing (62) and Debt Financing (65) remained above 50 for the eighth time in the past nine quarters. Any number above 50 indicates quarter-to-quarter growth.

"Market conditions improved across the board, even from the rather strong level of three months ago," said NMHC Chief Economist Mark Obrinsky. "Demand for apartment residences – and apartment properties – continues to grow. We anticipate this increasing further in the coming years due in part to the large number of younger households moving into the housing market and a greater preference shown for renting.

"The strength of the sector’s recovery has attracted capital to the industry," said Obrinsky. "But our latest survey finds that capital is largely targeted at top-tier properties in core markets and not widely available throughout the U.S. Fully 79 percent of respondents said capital was constrained either by property type, by market or both."

Key findings include:

• Capital availability lacks uniformity. Only 17 percent of multifamily firms reported that capital is available for all property types in all markets. By contrast, 36 percent said it is constrained in secondary and tertiary markets and 34 percent said it is constrained for all properties other than top-tier ones – even in primary markets.
  
• The Market Tightness Index increased to 74 from 60. Nearly half (49 percent) reported tighter markets – reflecting lower vacancy rates and/or higher rents – compared to only one percent reporting looser markets.
  
• The Debt Financing Index declined to 65 from 74. As the only index that dropped below 50 in the past nine quarters (48 in Q4 2010), borrowing conditions continued to improve for the industry. Just four percent believed conditions worsened from last quarter, compared to 34 percent who reported improving conditions.
  
• The Sales Volume Index rose to 57 from 50. This continues an 11-quarter run above 50, and some reports from the field suggest that volume could be even higher if more product was available.
  
• The Equity Financing Index grew slightly to 62 from 60. One third of respondents reported quarter-to-quarter equity financing as more available, compared to nine percent reporting less availability.

Full survey data are available at: www.nmhc.org/goto/60767.

About the survey: The April 2012 Quarterly Survey of Apartment Market Conditions was conducted April 16-23, with 91 CEOs and other senior executives of apartment-related firms nationwide responding.

To view this release online, visit www.nmhc.org/goto/60768.

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Based in Washington, DC, NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S. NMHC’s members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers and financiers. One-third of Americans rent their housing, and over 14 percent live in a rental apartment. For more information, contact NMHC at 202-974-2300, email the Council at info@nmhc.org or visit NMHC's website at www.nmhc.org.

Contact Jim Lapides at:
202-974-2360
jlapides@nmhc.org
www.nmhc.org