The apartment industry continues to show signs of gradual improvement, according to the National Multi Housing Council‘s (NMHC) July 2004 quarterly Survey of Apartment Market Conditions. Senior apartment executives asked to rate the change in market conditions from April 2004 to July 2004 reported improvements in occupancy rates, continued high sales volumes, and widely available equity financing as investors continue to seek out apartment properties. For the second straight quarter, the only indicator to worsen was debt market conditions, as a result of recent interest-rate increases.

“The apartment market could see a full-fledged recovery by the end of the year if the economy continues to strengthen at its current pace,” said Mark Obrinsky, NMHC’s chief economist. “Demand for apartment residences is determined, in large part, by the employment picture. The modest increase in new jobs reported recently is already helping to increase occupancy rates. As more jobs are created, more people will be able to move out on their own and into apartments.”

The Market Tightness Index, which reflects changes in vacancy rates and rent increases, came in at 72, the highest level ever. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past three months.) For the first time ever, a majority of respondents (51 percent) noted conditions were tighter in the markets they’re familiar with, while only 8 percent–the lowest ever–said conditions were looser.

Apartment property sales continue to post record high levels. For the fifth straight quarter the Sales Volume Index was above 50, coming in at 54. Equity investors also continue to seek out apartments. The Equity Financing Index also came in at 54, marking the eighth time in the past 9 quarters the index has been above 50 (and it just barely missed in ninth quarter, hitting 49). Fully 72 percent of respondents indicated that equity financing for apartments remained unchanged from the favorable conditions prevailing three months ago.

As a result of rising interest rates, debt-financing conditions worsened somewhat. The Debt Financing Index fell to 36, the lowest figure in 9 quarters. Although almost half of respondents (46 percent) regarded debt-financing conditions as unchanged, another 38 percent concluded that conditions were less favorable than three months ago; only 11 percent thought conditions had become more favorable.

NMHC’s quarterly survey was conducted via e-mail July 12-16 and was sent to CEOs and senior apartment 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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