For the ninth quarter in a row, senior apartment executives report higher occupancy rates, rising rents, increased sales volume and equity availability, according to the National Multi Housing Council’s October 2005 Quarterly Survey of Apartment Market Conditions. 

Seventy-five percent of survey respondents reported improved demand for apartments, measured by lower vacancy rates, higher rents or both. A mere two percent reported looser conditions, suggesting that there are virtually no markets where conditions are worsening, and an increasingly large number of markets where demand is improving further. As a result, the survey’s Market Tightness Index rose to yet another all-time high of 87 in October. This was the ninth consecutive quarter of improving demand.

“Even with record-level single-family home sales, demand for apartment residences by individuals and families continues to strengthen virtually across the board,” noted NMHC Chief Economist Mark Obrinsky. “If the home-ownership market should start to cool, demand for apartments could rise even further.”

The survey also asked about the impact of those displaced by hurricane Katrina on apartment markets. Half (51 percent) of the respondents indicated that there has been little impact. One-third (33 percent) noted that apartment occupancy is up somewhat. Only 11 percent indicated that occupancy is up substantially in their markets. 

“Clearly some apartment markets, such as Houston and Dallas, have experienced significant occupancy increases in the past month because of the hurricane evacuees,” said Obrinsky, “but that demand increase has not had a significant impact on the overall apartment sector.” 

The survey’s four indexes measure changes in market conditions between July and October. Highlights of the survey include:

  • The Market Tightness Index, which measures changes in vacancy rates and rents, rose from 80 in July to 87 in October. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past three months.)

  • Already high investor demand for apartments remains unabated. Respondents noting higher sales volume than three months earlier outnumbered those observing lower sales volume by a ratio of almost 4 to 1 (42 percent to 11 percent). Overall, the Sales Volume Index was unchanged at a record 66, and represented the 10th consecutive quarter of increasing sales volume.

  • The Equity Financing Index edged down somewhat, but at a level of 54 was still the ninth straight quarter (and 13th time in the past 14 quarters) that the index has surpassed 50 showing improving equity financing conditions. While 61 percent of respondents indicated conditions were unchanged, 19 percent indicated that conditions had improved, compared with 11 percent who reported that conditions had worsened.

  • The Debt Financing Index dropped to 38, the first under-50 reading since July 2004. (A score above 50 means more respondents saw improving conditions than saw worsening conditions over the past three months.) This clearly reflects the rise in interest rates over the past few months. It may also reflect some tightening of lending standards.

The October 2005 Quarterly Survey was conducted October 11-18, 2005. Fifty-seven CEOs and other senior executives of apartment-related firms nationwide who serve on NMHC’s Board of Directors or Advisory Committee responded.

Washington, D.C.-based NMHC is a national association representing large U.S. apartment companies.


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