Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor

 

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The National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions shows a mixed bag of market conditions as of January, based on responses from multifamily professionals.

The Sales Volume Index came in at 53, above the survey’s “break-even level” of 50, while the Equity Financing Index came in at 58. At 43, the Market Tightness Index indicated ongoing weakness, while the Debt Financing Index (49) showed little change from last quarter.

“We are continuing to observe a tale of two markets during the COVID-19 pandemic,” says NMHC chief economist Mark Obrinsky. “Despite higher vacancy and lower apartment rent growth overall, this weakness has been largely concentrated in high-cost urban areas. Many suburban areas, on the other hand, continue to benefit from an influx of ex-urbanites.”

The Market Tightness Index rose from 35 to 43 from one quarterly survey to the next but remained below the break-even point. Only 16% of respondents reported tighter market conditions than three months earlier, while 30% reported looser conditions and 53% reported no difference.

“Another silver lining to be gleaned from [January’s] survey is that less than a third of respondents actually reported looser market conditions, compared to 49% of respondents in October, 71% of respondents in July, and 82% of respondents in April,” Obrinsky says. “Instead, a majority of respondents (53%) thought that market conditions were unchanged, suggesting that we may be nearing an inflection point in the market for apartment residences.”

The Sales Volume Index fell from 72 in October to 53 in January, still marking the second-best reading in this index in 2 1/2 years. Over one-third of respondents (35%) reported higher sales volume than three months previous, while 29% indicated lower volume and 31% reported sales volume was unchanged.

The Equity Financing Index fell from 62 in October to 58 in January. Twenty-four percent of respondents said that equity financing was more available than in the previous three months, while 8% said it was less available and 52% reported no change. The Debt Financing Index fell from 73 to 49 over the same period; 22% of respondents reported better conditions for debt financing, while 24% reported worse conditions and 46% reported conditions were unchanged.

An additional question in this quarter’s survey asked respondents how they planned to adjust their investment strategies, given weakness in top-tier markets. Very few—only 8% —said they plan on disinvesting in these markets. Twenty-three percent said they will continue to invest in these markets, while 48% said they are “investing carefully” and 24% have adopted a “wait and see” strategy.

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Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor

 

The latest data from the National Multifamily Housing Council shows that nearly half of respondents believe market conditions are looser than three months ago.

National apartment conditions could be showing signs of improvement, according to apartment owners then responded to the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions.

The market tightness index increased from 19 to 35, which indicates a loosening market. According to the survey, 49% of respondents said that market conditions were looser than in the prior three months. Only 18% of respondents said that market conditions are tighter than the prior three months, while 33% of respondents thought the market conditions were unchanged. According to NMHC chief economist Mark Obrinsky, market conditions are continuing to deteriorate, but the market tightness index shows that there is a growing variation in the market outlook from respondents.

Other areas of the survey show improving market conditions. The sales volume index increased from 18 to 72, and 60% of respondents reported higher sales volume than the prior three months. This was a significant majority. Only 16% of respondents in the survey said that sales volumes decreased compared to the prior three months, and 19% found the market unchanged. This data shows that investment capital is returning to the market after retreating at the start of the pandemic. Historically low-interest rates and greater availability of debt has helped drive capital back to the market.

In the debt financing index, more than half—51%—of respondents are having an easier time securing financing than in the previous quarter, and 35% of respondents thought that the market was unchanged. Only 6% of respondents reported that the debt conditions were worse than the prior quarter.

Finally, the equity financing index also showed stable market conditions. Most respondents to this portion of the survey—42%—said that the market conditions for equity were unchanged from the prior three months. However, 35% reported improving conditions, while 12% of respondents found equity financing was less available than the previous quarter.

Overall, apartment owners’ outlook on the market is improving. The survey asked respondents to share their outlook on these trends, and 46% expect that these conditions will last six to 12 months beyond the end of the pandemic, while 31% of respondents believe that these trends will end when the pandemic ends. Only 8% of respondents believe that these market conditions will persist indefinitely—the most pessimistic outlook—while the additional 16% were unclear on the future of the market.

 

Source: GlobeSt By Kelsi Maree Borland | October 26, 2020 at 06:52 AM

Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor