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Index Finds Rental Market Gaining Strength and Condos Remaining Strong

“The results of the MMI for the second quarter are very encouraging,” said NAHB President Bobby Rayburn. “After three years of rising vacancy rates, we’re seeing a turnaround in the apartment market.”

The index for this year’s second quarter found that demand was improving for all classes of apartments.

Class B apartments — the average market-rate communities — were at 50.6 on the index, seven points higher than a year earlier; and luxury Class A units registered 49.2, a 10-point improvement over the second quarter of 2003. Lower-rent units, a category that generally outpaces the other two when it comes to demand, stood at 55.3, 10 points higher than the April-June period a year earlier.

The index found that oversupply still remains an issue in some markets. The number of apartments available for rent jumped nearly 10 points from the second quarter of 2003 to the second quarter of 2004, from 52.1 to 64.0 on the index. Over that same period, however, the volume of calls from prospective renters rose by a healthy margin — from 49.3 to 59.1

The current MMI also found that the market for condos remains strong, with the index reaching 58.9, a five-point improvement over the same period a year earlier. Although survey respondents said that they expect the condo market to remain healthy, they expect it to cool somewhat in the next six months.

“As interest rates slowly rise, both the for-sale and rental multifamily sectors will approach new points of stability,” says NAHB Chief Economist David Seiders. “Activity in the condominium sector will remain high, especially in and near large cities whose land supplies are particularly tight, and rental demand will rise with higher mortgage interest rates and stronger rates of job formation.”

For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.

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