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Index Finds Condo Market Strong and Hopes Rising for Rental Apartments

“Home buyers across the country are realizing that condos can be an ideal choice for people who want to enjoy the financial advantages of homeownership while maintaining the amenity-rich, low-maintenance apartment lifestyle,” said NAHB President Bobby Rayburn. “We expect that the demand for condos will continue to rise, especially in urban areas, and particularly while excellent financing opportunities exist.”

The for-sale component of the MMI climbed to 59.5, up six points from the previous quarter and up eight points from one year earlier. Multifamily builders also expressed confidence that the demand for condos would continue; the index gauging for-sale starts expected over the next six months jumped to 62.0.

The MMI is based on a survey of multifamily developers, owners and managers, whose answers to a series of questions are assigned numerical values in order to calculate separate indices that track both supply and demand. An index value over 50 indicates that more respondents view market conditions as good rather than poor.

Although the rental market remained sluggish in the fourth quarter, with indexes tracking demand below 50 for all classes of apartments, conditions are improving slightly. Demand for Class A apartments was up almost five points to 40.0 on the MMI, and multifamily builders appear optimistic that the next six months will show continued improvement for both market-rate and affordable apartments.

The indexes tracking builder expectations rose dramatically to 58.4, 58.3 and 58.0 respectively for Class A, Class B and Class C apartments. Survey respondents said the volume of calls from prospective renters was up and that 66% of their new units rented within 90 days during the fourth quarter of 2003, compared to 57.9% in the previous quarter.

“Historically, rental apartment demand has been dependent on job growth,” said NAHB Chief Economist David Seiders. “While the recession has been over for a while, we haven’t seen enough job growth to fuel strong rental demand, but with improving economic indicators, we hope to see a turnaround soon.”

2004 NAHB Multifamily Pillars of the Industry Conference & Awards Gala

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