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Index Finds Multifamily Market Gaining Strength
Demand for rental apartment homes continued to gain momentum and there were no signs of the nation’s condominium market cooling off in the fourth quarter of 2004, according to the latest Multifamily Market Index (MMI), which was released last week by NAHB.
“The improving job market is driving a rebound in apartment rentals,” said NAHB President David Wilson. “At the same time, attractive interest rates and strong price appreciation rates continue to spur condo sales.”
“These numbers indicate that a healthier multifamily housing market is emerging, one in which demand more clearly aligns with supply,” said NAHB Chief Economist David Seiders. “The positive outlook for the economy in general, and for job growth in particular, means that the news for multifamily housing should continue to be good.”
The MMI is based on a quarterly, nationwide survey of multifamily builders and property owners who are asked a series of questions about current market conditions as well as their expectations for the next six months. The index tracks assessments of both demand and supply, and any number over 50 generally indicates more positive than negative responses.
Continuing a third-quarter trend, all classes of rental apartments showed gains on the demand side in the final three months of last year, with the biggest increase in mid-range-rent Class B apartments; they jumped eight points from a year earlier to 50.8 on the index.
Demand for luxury units in 2004’s closing quarter was five points higher on the index than the closing quarter of 2003, and low-rent communities posted a seven-point gain over the 12-month period.
Survey respondents expected the trend in rising demand to continue over the next six months.
The index tracking the number of apartments available for rent continued a downward trend, registering a 13.2-point drop from 69.6 in the final quarter of 2003 to 56.4 in the fourth quarter of 2004. During that same period, the index tracking the volume of calls from prospective renters rose nearly four points to 50.0, up from 45.9.
The current average vacancy rate for rental apartments was 7.8%, down from 8.5% in the previous quarter.
On the supply side, market-rate apartments showed the biggest gain, rising more than four points to 49.3 for fourth quarter of 2004.
Builders participating in the MMI survey said they expect to see even greater gains over the next six months.
Condos continued to be the strongest category on the index; although the 57.1 fourth-quarter reading was down from 59.5 a year earlier.
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