Multifamily market conditions are showing signs of improvement, according to the National Multifamily Housing Council’s quarterly survey for October. Three of the four indices that are part of the Quarterly Survey of Apartment Conditions—equity financing, debt financing, and sales volume—were above the breakeven level of 50, indicating more favorable conditions. However, the Market Tightness Index fell below the breakeven level.
“The 10-year Treasury yield fell 28 basis points (bps) over the past three months, as the Federal Reserve enacted its first 50-bp cut to short-term rates,” said Chris Bruen, NMHC economist and senior director of research. “Survey respondents, in turn, reported more favorable conditions for debt financing for the third straight quarter and more available equity financing for the first time in two-and-a-half years.”
With the July Quarterly Survey showing a potential rebound in deal flow and the Fed’s rate cut in September, the October round of the survey reflected increasing sales volume and more favorable financing conditions.
“Elevated levels of multifamily deliveries, however, resulted in the ninth consecutive quarter of looser conditions, especially in the South and in Sun Belt markets,” added Bruen. “Still, strong demand for apartments has meant that much of this new supply is getting absorbed.”
Findings from the survey, which was conducted between Sept. 30 and Oct. 15, with 103 CEOs and other senior executives of apartment-related firms nationwide, include:
- The Market Tightness Index came in at 37—10 points down from the quarterly survey in July— indicating looser market conditions. Nearly half of the respondents, 46%, thought market conditions were unchanged compared with three months ago, while 40% reported looser markets, up from 27% in July. The remaining 15% reported tighter markets.
- The Equity Financing Index was at 63, marking the first quarter of more available equity since January 2022. Up from 13% in July, 32% of respondents cited more available equity financing, while 6% said it was less available.
- The Debt Financing Index reached 77, with the majority of respondents, 62%, reporting now is a better time to borrow than three months ago. Only 8% of respondents believed borrowing conditions to be worse, while 25% cited unchanged conditions.
- In addition, the Sales Volume Index saw its third straight quarter of increasing deal flow with a reading of 67. Almost half of the respondents, 46%, reported unchanged sales volume this quarter compared with three months ago, while 43% reported higher sales volume and 10% cited lower volume.
