by Calculated Risk on 11/11/2008 10:33:00 PM

From the National Multi Housing Council (NMHC): Weakening Economic Conditions Create Challenging Conditions For Apartment Sector, According to National Multi Housing Council Survey (hat tip Jon Lansner at the O.C. Register)

“Nine straight months of job losses have begun to cut into the demand for apartment residences,” said Mark Obrinsky, NMHC’s Vice President of Research and Chief Economist. “While favorable demographics and a lower homeownership rate will benefit the apartment industry over time, owners and managers will first have to work their way through the current economic downturn before the benefits of that increased demand are likely to show up. Until then, economic worry will cause some people to “double up” by moving in with a friend or returning to their parents’ house.”

The Market Tightness Index, which measures changes in occupancy rates and/or rents, dropped from 40 last quarter to 24. This was the fifth straight quarter in which the index has been below 50. (For all of the survey indexes, a reading above 50 indicates that, on balance, conditions are improving; a reading below 50 indicates that conditions are worsening; and a reading of 50 indicates that conditions are unchanged.)

Click on graph for larger image in new window.

This graph shows the quarterly Apartment Tightness Index.

As NMHC chief economist Obrinsky noted, it is common in a recession for apartment vacancies to rise, as households double up by moving in with a friend or family member. However an added factor in this recession is all the single family homes being offered as rentals. This is additional competition for apartments and might also be impacting demand for apartments.