Multifamily market conditions were mixed, according to the National Multifamily Housing Council’s quarterly survey for July. Two of the four indices that are part of the Quarterly Survey of Apartment Conditions—debt financing and sales volume—were above the breakeven level of 50, indicating more favorable conditions. However, the other two indices—equity financing and market tightness—fell slightly below the breakeven level.
“Concessions have become commonplace in markets with elevated levels of deliveries, as survey respondents reported overall looser market conditions for the eighth consecutive quarter,” said Chris Bruen, NMHC economist and senior director of research. “Yet, this has not been for lack of demand, which is helping to absorb this new supply at a healthy pace.”
Findings from the survey, which was conducted between June 26 and July 16 with 174 CEOs and other senior executives of apartment-related firms nationwide, include:
- The Market Tightness Index came in at 47. Half of the respondents thought market conditions were unchanged compared with three months ago, while 27% reported looser markets, down from 37% in April. The remaining 22% reported tighter markets.
- The Equity Financing Index was at 49, just under the breakeven level. This was the 10th consecutive quarter in which equity financing was found to be less available than the prior three months. Overall, 60% of respondents reported equity availability to be unchanged, 13% thought it was more available, and 16% thought it was less available.
- The Debt Financing Index reached 63, with 37% of respondents reporting now is a better time to borrow than three months ago. Only 11% of respondents believed borrowing conditions to be worse, while 44% cited unchanged conditions.
- In addition, the Sales Volume Index saw its second straight quarter of increasing deal flow with a reading of 57. Nearly one-third of respondents, 32%, reported higher sales volume this quarter, up from 6% in January and 21% in April. However, 46% reported unchanged sales volume compared with three months ago, and 18% cited lower volume.
“The 10-year Treasury yield fell 25 basis points over the past three months as inflation edged closer to the Federal Reserve’s 2% target, and the labor market began to show some signs of cooling. This has led to more favorable conditions for debt financing and a second straight quarter of increasing sales volume, even while a plurality of respondents report unchanged conditions,” Bruen added.
