NEWS HEADLINES

APARTMENT FINANCE TODAY • JANUARY 2008

Increased Apartment Demand, Notes NMHC Quarterly Survey

By Dana Enfinger

The mortgage crisis and its resulting economic fallout are having mixed results on the multifamily industry, according to the National Multi Housing Council’s (NMHC) latest Quarterly Survey.

Even though sales volume is down and less equity is available, apartment demand is getting a boost from the housing slump.

“The apartment industry is clearly benefiting from the downturn in the for-sale housing industry,” said Mark Obrinsky, NMHC’s chief economist. “While the ‘shadow’ rental market may attract some apartment renters, thus far, the lowest homeownership rate in five-and-a-half years seems to have increased demand for apartment residences.”

It also helped that multifamily developers have not been overbuilding, Obrinsky added.

Nearly 80 percent of survey respondents noted that the credit crunch has kept renters in their apartments and out of homeownership.

One surprising result was the significant improvement in the Debt Financing Index of the survey. Forty percent of respondents indicated borrowing conditions were worse, while a quarter said they were unchanged. These responses point to the tightened underwriting standards and the iced-over commercial mortgage-backed securities market. Twenty-nine percent of all respondents indicated borrowing conditions were better this quarter, up from 20 percent from the previous quarter.

The current economic climate is having the most impact on sales volume.

The survey’s Sales Volume Index was below 50 for the ninth consecutive quarter. For January 2008, the index reading was 18, increasing from 12 in October 2007. Although this is an improvement, the score is the second lowest figure in the history of the NMHC survey. A Sales Volume Index reading higher than 50 indicates that sales volume around the country is increasing; a reading below 50 indicates that sales volume is decreasing. A reading of 50 indicates that market conditions are unchanged.

Find survey results at www.nmhc.org.