Conditions in the apartment market are looking up after several quarters of increasing vacancy rates, according to the National Multi Housing Council’s January 2004 quarterly survey of apartment market conditions.

For the first time in the survey’s nearly five-year history, all four indexes used to measure changes in apartment market conditions – the market tightness index, the sales volume index, the equity-financing index and the debt-financing index – edged above 50. A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past three months.

“The January survey results provide further evidence that the worst may be over for the apartment industry,” said Mark Obrinsky, NMHC vice president of research and chief economist. “There have been several signs of improvement in several months; the question now is whether these improvements will be sustained. A brighter employment picture is still the key to improving the demand for apartment residences.”

For the second quarter in a row, the market tightness index, which reflects changes in vacancy rates and rent increases, remained above 50. Before October 2003, the index had not been above 50 for two years. Twenty-one percent of respondents said conditions in their markets were tighter than three years ago, compared with 16 percent who indicated conditions were looser. The 16 percent figure is the lowest such reading since July 2000.

The sales volume index edged down a bit to 52, from 57, but still remained above 50, showing continuing increases in sales volume in markets around the country. Again, most respondents (58 percent) saw conditions unchanged; 21 percent indicated a pickup in sales, while only 16 percent (the second lowest ever) saw lower sales volume in their markets.

The equity-financing index rose for the fourth quarter to 61, exceeding 50 for the sixth time in the last seven quarters. This is a further indication that investors continue to favor apartment properties as an investment alternative. Just 3 percent said equity financing was less available than three months ago, while 26 percent said it was more available.

The debt-financing index rebounded from 43 in October to 64, indicating an improvement in multifamily mortgage borrowing conditions. Thirty-one percent said, “now is a better time to borrow,” compared to 13 percent in October.

NMHC’s quarterly survey was conducted via e-mail January 19-26 and was sent to CEOs and senior apartment firm executives who serve on NMHC’s Board of Directors and Advisory Committee.

Washington, D.C.-based NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S.


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