NMHC: Apartment Market Continues to Loosen

Article originally posted on Multifamily Executive on January 23, 2024

Multifamily market conditions continued to weaken at the start of the year, according to the National Multifamily Housing Council’s quarterly survey for January. However, financing conditions have started to show signs of improvement.

Three of the four indices that are part of the Quarterly Survey of Apartment Conditions—market rightness, sales volume, and equity financing—remained below the break-even level of 50, while the Debt Financing Index moved into positive territory.

“The 10-year Treasury yield has dropped nearly a full percentage point since October, as core inflation continues to moderate and Fed officials signal likely rate cuts in 2024,” said Chris Bruen, senior director of research at the NMHC. “This has caused availability of debt financing to increase for the first time in nine quarters. Yet, the apartment market continues to record decreasing rent growth and rising vacancy rates as it absorbs the highest level of new supply in more than 30 years.”

Findings from the survey, which was conducted between Jan. 3 and 17 with 205 CEOs and other senior executives of apartment-related firms nationwide, include:

• The Market Tightness Index came in at 23, indicating looser market conditions for the sixth consecutive quarter. More than half of the survey respondents, 59%, reported that market conditions were looser than three months ago, while only 5% cited tighter conditions. The remaining 35% reported unchanged conditions.
• The Sales Volume Index was 34, marking the seventh consecutive quarter of decreasing transaction flow. More than half of the respondents, 54%, reported sales volume to be unchanged over the past three months, while 37% cited lower volume; only 6% reported that deal volume was higher.
• The Equity Financing Index at 44 indicated that equity financing was less available for the eighth consecutive quarter. Half of the respondents believed availability to be unchanged from three months ago, while 27% reported equity financing to be less available and 14% noted more availability.
• The Debt Financing index came in at 66, a marked improvement from 9 in October. Nearly half of the respondents, 45%, reported better debt financing conditions, up from 0% in October. Fourteen percent said now is a worse time to borrow than three months ago, while 35% cited unchanged conditions.