by Calculated Risk on 4/18/2013 04:36:00 PM

From the National Multi Housing Council (NMHC): Apartment Markets Resume Growth According to NMHC Survey

Apartment markets improved across all areas according to the National Multi Housing Council’s (NMHC) April Quarterly Survey of Apartment Market Conditions. All four indexes – Market Tightness (54), Sales Volume (55), Equity Financing (56) and Debt Financing (59) – came in above 50, which indicates improving conditions. This reverses last January’s findings, where Market Tightness and Sales Volume dipped below 50 for the first time since 2010.

“The apartment industry is operating on cruise control, as the expansion continues unabated,” said Mark Obrinsky, NMHC’s Vice President for Research and Chief Economist. “While concern about overbuilding has begun to crop up, demand for apartment residences remains strong. New construction may have finally recovered fully, but most units under construction won’t be delivered until 2014 or later. The dearth of recent completions has contributed to relatively low product availability. As deliveries increase, we expect to see an even greater pick-up in sales volume.”
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Market Tightness Index rose to 54 from 45. The index has been above 50 for 12 of the past 13 quarters, with only January 2013 indicating contraction. One quarter of respondents saw markets as tighter, up from 16 percent last quarter.
emphasis added

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tightening from the previous quarter. This quarterly increase was small, but indicates tighter market conditions.

On supply: Even though multifamily starts have been increasing, completions lag starts by about a year - so the builders are still trying to catch up. There will be many more completions in 2013 and 2014, than in 2012, increasing the supply.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010. This survey now suggests vacancy rates might be nearing a bottom, although apartment markets are still tight, so rents will probably continue to increase.