Apartment Conditions Send Mixed Signals

The apartment market has been sending mixed signals during the most recent quarter with debt financing and sales volume indicating favorable conditions while equity financing and market tightness indices came in below breakeven.

The data comes from the National Multifamily Housing Council’s (NMHC) quarterly survey of apartment market conditions in July, which found that while equity financing continues to be less available than quarters prior, and a tight monetary policy environment persists, deal flow and opportunities to transact are showing signs of a rebound.

“Concessions have become commonplace in markets with elevated levels of deliveries, as survey respondents reported overall looser market conditions for the eighth consecutive quarter,” said NMHC economist and senior director of research, Chris Bruen. “Yet, this has not been for a lack of demand, which is helping to absorb this new supply at a healthy pace.”

Coming in at 47 for the quarter, below the breakeven level of 50, NMHC’s Market Tightness Index indicates looser market conditions for the eighth consecutive quarter. Half of the respondents said they thought market conditions were unchanged from three months ago, 27% thought markets have become looser and 22% reported tighter markets.

The Sales Volume Index reflected a second straight quarter of increasing deal flow following seven consecutive quarters of decline. About 46% of respondents reported unchanged sales volume from three months ago, while 32% reported higher sales volume and 18% thought volume was lower.

The Equity Financing Index came in one point shy of breakeven at 49, marking the 10th consecutive quarter in which equity financing was less available than the previous three months. Sixty percent of respondents reported the availability of equity financing to be unchanged from three months ago, while 13% thought it was more available and 16% thought it was less available.

Also, the Debt Financing Index of 63 indicated more favorable conditions for debt financing compared to the previous quarter. About 44% of respondents thought debt financing conditions were unchanged, while 37% reported they were better and 11% believed borrowing was worse than three months ago.

Although 45% of respondents thought opportunities for apartment transactions were about the same as three months ago, 28% believed more properties would fit their transaction criteria compared to three months ago. Conversely, 19% believed there were fewer properties that would fit their transaction criteria, said the report.