Multifamily Conditions Continue to Weaken, Survey Shows
Nearly two-thirds of respondents reported markets to be looser than three months ago
The condition of the U.S. apartment market continues to weaken judging by four key criteria, according to an October survey by the National Multifamily Housing Council.
The Council defines “tight” markets as those with low vacancies and high rent increases. A reading above 50 on the market tightness index indicates that market conditions are getting tighter; a reading below 50 suggests the opposite.
For 3Q 23 the market tightness index came in at 21 – the fifth consecutive quarter where it scored well below the baseline. “Nearly two-thirds of respondents (64%) reported markets to be looser than three months ago,” the report said. One in four thought conditions unchanged and a lucky 6% thought them tighter. By comparison, market tightness scores from April 2021 to July 2022 soared well above 50, reaching 96 in July 2021.
The Sales Volume index experienced a slump in deal flow for the sixth consecutive quarter, to a reading of 24 – a sharp drop from its score of 40 in 2Q 23. Some 57% of respondents reported lower sales volume. Just 5% saw improvement.
Both financing indexes surveyed reflected the losing trend, with scores below 50 indicating less availability. The Equity Financing Index score of 18 was the lowest since January 2023; 64% of respondents said equity financing was less available than three months ago. Debt Financing eked out a score of just 9, with 83% of respondents finding it a worse time to borrow than the previous quarter.
The Council attributed the negative tone of its findings to rising interest rates, tighter lending standards and the fact that buyers and sellers of apartments can’t agree on pricing. Eventually, the softer apartment market could have one benefit if it reduces rent costs as a component of inflation. That “could help overall inflation to cool to the Fed’s 2% target and allow the Federal Reserve to start easing policy,” the report said. “Over the longer term, demand for multifamily housing remains strong based on demographic trends and market fundamentals.”