Apartment Industry in U.S. Enjoys Two Years of Consecutive Growth

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According to the latest National Multi Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions, market conditions continued to improve for the multifamily industry across all areas.

For the seventh time in the last eight quarters, all four indexes reflecting Market Tightness, Sales Volume, Equity Financing and Debt Financing were at or above 50 - indicating growth from the previous quarter.

"In the face of an unprecedented virtual shutdown of development, the apartment market continues its strong recovery as developers play catch-up to the growing demand for rental housing," said NMHC Chief Economist Mark Obrinsky. "Investors continue to view apartments as a preferred asset class in today's environment and long-term demographic changes favor rental housing. However, we expect the pace of improvement in transaction activity to ease somewhat moving into 2012."

Key report findings include:

• The Debt Financing Index increased from 70 to 74. Half (50 percent) of respondents reported that now was a better time to borrow, up from 22 percent this time last year. This is the only index that fell below 50 over the past eight quarters--and just barely (48 in January 2011).

• The Market Tightness Index rose to 60 from 52, marking the eighth straight quarter with the index at or above 50. Half of respondents (51 percent) reported the markets as unchanged from the previous three months. This compares with the 46 percent average over the 12-plus years of the survey.

• The Sales Volume Index eased further to 50 from 54. This continues a ten-quarter run of at or above 50, though it reflects the lowest number since July 2009.

• The Equity Financing Index moved up to 60 from 54, also continuing a ten-quarter run of at or above 50. More than half of respondents considered conditions unchanged from the previous quarter in the Market Tightness, Sales Volume and Equity Financing Indexes.

• Development activity continues to increase in most markets, with just over half (53 percent) reporting a substantial pickup in land acquisition, lining up financing, and getting building permits, though not yet much in the way of actual construction starts. An additional 20 percent said that developers have been breaking ground on new projects at a rapid clip.