The popularity of condominiums continues to surge, and conditions in the rental apartment market are finally showing signs of improvement, according to the National Association of Home Builders’ Multifamily Market Index (MMI), a quarterly gauge of multifamily market activity and builder confidence.
The for-sale component of the MMI climbed to 59.5 in the fourth quarter of 2003, up six points from the previous quarter and up eight points from one year ago. Multifamily builders also expressed confidence that the demand for condos would continue-the index gauging expected for-sale starts over the next six months jumped to 62.
The MMI is based on a survey of multifamily developers, owners and managers whose answers to a series of questions are assigned numerical values in order to calculate separate indices that track both supply and demand. An index value over 50 indicates that more respondents view market conditions as good rather than poor.
“People across the country are realizing that condos can be an ideal choice for people who want to enjoy the financial advantages of home ownership while maintaining the amenity-rich, low-maintenance apartment lifestyle,” said NAHB President Bobby Rayburn, a home and apartment builder from Jackson, Miss. “We expect that the demand for condos will continue to rise, especially in urban areas, and particularly while excellent financing opportunities exist.”
Although the rental market remained sluggish in the fourth quarter, with indexes tracking demand below 50 for all classes of apartments, conditions are improving slightly. Demand for class A apartments was up almost 5 points to 40 on the MMI from the previous quarter, and multifamily builders appear optimistic that the next six months will show continued improvement for both market-rate and affordable apartments.
The indexes tracking builder expectations rose dramatically to 58.4, 58.3 and 58, respectively, for class A, class B and class C apartments. Survey respondents said the volume of calls from prospective renters was up and that 66 percent of their new units rented within 90 days during the fourth quarter of 2003, compared to 57.9 percent in the previous quarter.
“Historically, rental apartment demand has been dependent on job growth,” said NAHB Chief Economist David Seiders. “While the recession has been over for a while, we haven’t seen enough job growth to fuel strong rental demand, but with improving economic indicators, we hope to see a turnaround soon.”
The National Association of Home Builders is a Washington, D.C.-based trade association representing more than 215,000 members involved in residential and light commercial construction.
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