InvestingMarkets & Economy

Apartment market tightens — here’s why that’s bad news for housing

Apartments are the base of the pyramid -- think food chain, from plankton to krill to whales
  • The bottom of the housing food chain is the rental apartment.
  • The entire remainder of the housing market rests on a foundation of apartment conditions.

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The quarterly survey of apartment conditions by the National Multifamily Housing Council (NMHC) is flashing a warning -- at least amber, and maybe shifting orange toward red. And not just for housing, but the economy itself: The survey pattern looks just like the beginning of the last two recessions. Why would apartment conditions say so much for housing, and possibly the economy? Think food chain, from plankton to krill to whales. From apartments to housing The bottom of the housing food chain is the rental apartment (some would argue that trailers are, but they are a market all by themselves). The entire remainder of the housing market rests on a foundation of apartment conditions. The rest of the chain, going up from apartments: first the converted condominium. You can buy it and protect yourself from increases in rent, permanently fixing your cost of housing, but it’s still an apartment. Few people want to buy conversions unless they fear that rents will rise. T...