WASHINGTON, D.C. — Apartment market conditions declined across three of the four indexes measured by the October National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The Market Tightness (41), Sales Volume (44), and Debt Financing (22) Indexes all came in below the breakeven level of 50, while the Equity Financing Index (51) remained slightly above the breakeven level.
“Apartment markets softened somewhat over the last three months,” said NMHC Chief Economist Mark Obrinsky. “While most respondents (53 percent) indicated market tightness was unchanged in October, more respondents saw looser conditions (33 percent) than tighter conditions (14 percent). A strong majority (62 percent) noted worsening debt financing conditions, no doubt in large part due to the increase in interest rates.”
The survey also asked a question regarding the Trump administration’s tariffs. “It is clear that recently-enacted tariffs are raising costs in the apartment industry,” said Obrinsky.
The Market Tightness Index decreased from 46 to 41, marking the twelfth consecutive quarter of overall declining conditions. One-third (33 percent) of respondents reported looser market conditions than three months prior, compared to 14 percent who reported tighter conditions. Over half (53 percent) of respondents felt that conditions were no different from last quarter.
The Sales Volume Index fell from 55 to 44, indicating a return to the nearly two-year trend of declining sales volumes after a brief uptick last quarter. Slightly less than half of respondents (46 percent) reported unchanged sales volume from three months earlier, while almost one-third (30 percent) noted lower volume. Eighteen percent of respondents, on the other hand, reported higher sales volume.
The Equity Financing Index slid from 56 to 51, still indicating overall improving conditions for the fourth straight quarter, though with greater variation among responses. Sixteen percent thought equity financing was more available than in the three months prior, compared with fourteen percent who believed equity financing was less available. For the seventh consecutive quarter, most respondents (59 percent) reported unchanged conditions in the equity market.
The Debt Financing Index fell from 55 to 22. With interest rates moving up, nearly two-thirds of respondents (62 percent) reported worse conditions for debt financing compared to three months prior. A quarter (26 percent) of respondents reported unchanged conditions, while only 5 percent thought that conditions for debt financing had become more favorable.
Tariffs leading to rising costs. More than half of respondents noted costs rising by up to 5 percent, while an additional 28 percent reported costs rising by more than 5 percent. Thus far, most projects remain on track, though a minority (33 percent) appear to have been delayed by the impact of tariffs.”
About the Survey:
The October 2018 Quarterly Survey of Apartment Market Conditions was conducted October 9-16, 2018; 152 CEOs and other senior executives of apartment-related firms nationwide responded.