With consumer demand for apartments on the upswing, multifamily developers across the country are optimistic that the rental market is finally in the midst of a recovery, according to the results of the latest Multifamily Market Index released today by the National Association of Home Builders.
“The results of the MMI for the second quarter are very encouraging,” said NAHB President Bobby Rayburn, a home and apartment builder from Jackson, Miss. “After three years of rising vacancy rates, we’re seeing a turnaround in the apartment market.”
All classes of apartments showed improvement in demand, with class B apartments – the average market-rate community – showing an index value of 50.6, a 7-point rise since the same time last year. Luxury class A units also rebounded strongly with an index value of 49.2, a 10-point improvement since the second quarter of 2003. Lower-rent units, a category that generally outpaces the other two when it comes to demand, continued to do so with an index value of 55.3, an increase of 10 points over last year’s second quarter.
Oversupply still remains an issue in some markets. The index tracking the number of apartments available for rent jumped nearly 10 points from second quarter 2003 to second quarter 2004, from 52.1 to 64. At the same time, however, the index tracking the volume of calls from prospective renters saw a healthy increase, up to 59.1 from the 49.3 reported during the second quarter of 2003.
The current MMI also found that the market for condos remains strong, with the index gauging supply reaching 58.9, a figure that represents a 5-point improvement over 12 months ago. Although survey respondents said they expect the condo market to remain healthy, their expectations are that it will cool somewhat in the next six months.
“As interest rates slowly rise, both the for-sale and rental multifamily sectors will approach new points of stability,” said NAHB Chief Economist David Seiders. “Activity in the condominium sector will remain high, especially in and near large cities whose land supplies are particularly tight, and rental demand will rise with higher mortgage interest rates and stronger rates of job formation.”
The National Association of Home Builders is a Washington-based trade association representing more than 215,000 members involved in residential and light commercial construction.
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