WASHINGTON, DC—For the consecutive second quarter, apartment conditions as measured by the National Multifamily Housing Council's quarterly survey showed signs of ebbing. All four indexes in the survey remained below the break-even level of 50, and two of those indexes retreated considerably from the previous quarter.
“Weaker conditions are evident across all sectors as the apartment industry adjusts to changing conditions,” says Mark Obrinsky, SVP and chief economist with NMHC. “Rising supply—particularly during a seasonally weak quarter—is causing rent growth to moderate in many markets.” Fifty-eight percent of survey respondents reported looser market conditions in terms of vacancies and high rent increases, compared to 49% reporting looser conditions in the October 2016 survey and 16% who said this a year ago.
At the same time, Obrinsky says, “the sharp rise in interest rates in recent months was a triple whammy for the industry. First, higher rates directly worsen debt financing conditions. Second, the associated rise in cap rates also put a crimp in sales of apartment properties. Third, higher cap rates following the long run-up in apartment prices caused greater caution among equity investors.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
