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Builders Upbeat as Rental Demand Outpaces Supply
Strengthening demand and steady increases in occupancy levels in rental apartments with five or more units buoyed the confidence of multifamily builders during this year’s first quarter, and they are expecting the next six months to be even better, according to the latest Multifamily Rental Market Index (MRMI), released by NAHB on May 21.
"We've seen the national vacancy rate for rental apartment communities drop more than two percentage points between the first quarter of 2006 and the first quarter of 2007," said NAHB Chief Economist David Seiders. "Despite some competition from unsold condo units that have come onto the market as rentals in recent months, demand is still outpacing supply for rental apartments."
The component of the MRMI that tracks demand held just about steady during the first quarter for all classes of apartments from the same period a year earlier.
The index for Class A luxury apartments stood at 60.7 in the first quarter, down slightly from 61.6 a year earlier. Moderate apartments (Class B) dropped from 71.4 to 67.3 over the same period, and lower-priced apartments (Class C) gained a point, with the index inching up from 67.0 to 68.0.
The index scale runs from 0 to 100, with any number over 50 indicating that more multifamily builders view conditions as good than poor.
The quarterly survey also asks multifamily builders to rate the volume of traffic and calls from prospective renters to assess their expectations for the market over the next six months.
In the first quarter of 2007, builders' expectations jumped for all classes of apartments, with the index for luxury apartments rising the most significantly — by 12 points to 73.2. Expectations for Class B and Class C apartments rose to 71.2 and 68.0, respectively, in the first quarter, up from 70.0 and 63.0 during the first quarter of 2006.
Meanwhile, the indexes tracking supply declined slightly in this year’s first quarter from a year earlier, with market-rate rentals dropping from 54.6 to 53.5 and affordable (federally subsidized) apartments down from 53.5 to 54.6.
The upward bump in demand at a time of relatively constrained supply is also driving up rents. Asking rents registered 78.0 on the first-quarter index.
For information on resources from NAHB Multifamily, e-mail Ann Marie Moriarty, or call her at 800-368-5242 x8350.
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