|
Index Shows Weaker Demand for Rental Apartment Market
Builder confidence in the rental apartment market dropped sharply during the first quarter of this year, according to the latest results of NAHB’s Multifamily Rental Market Index (MRMI).
“The economic downturn is affecting the rental market as well as home building,” said NAHB Chief Economist David Seiders. “Rental vacancy rates are rather high and the demand for rental apartments is being held back by various economic conditions — including a weakening job market and record-high prices of food and energy.”
In the face of weak demand and less ready access to capital, he added, multifamily builders and developers are cutting back their production of new rental projects.
The MRMI is derived from a quarterly survey of multifamily builders and developers, whose responses are on a scale of 0 to 100, with 50 generally indicating that the number of positive and negative responses is about the same.
While oversupply is not as serious a problem for multifamily rentals as it is for condos, the index for the first quarter did indicate that multifamily builders are cutting back on new production.
The components of the index tracking current supply conditions for low-rent (federally subsidized) and market-rent apartments stood at 31.7 and 34.4, respectively, in the first quarter of 2008, down from 46.6 and 53.5 the same time a year earlier.
The component measuring expectations for market-rate apartment production for the next six months registered 51 on the index, down 12 points from the first quarter of 2007. Expectations for low-rent apartment starts fell to 45.1, down 15 points over the same time period.
Components of the index gauging demand were lower for all classes of apartments in 2008’s first quarter: Class A (luxury) units fell 20.1 points from the same quarter a year earlier, to 40.6; Class B apartments slipped 18.3 points, to 49.0; and Class C apartments were down 18.6 points to 59.4.
On the positive side, the index showed that the number of calls from prospective renters rose in this year’s first quarter to 59.6, four points higher than a year earlier. However, asking and effective rents were lower.
Although not as optimistic as a year earlier, builders polled in this year’s first quarter did expect rental apartment market conditions to improve over the next six months, with demand for Class B and C units remaining at 50 or above. The market for luxury units, on the other hand, registered 42.9, down from 73.2 during last year’s first quarter.
For more information on multifamily resources available from NAHB, e-mail Ann Marie Moriarty, or call her at 800-368-5242 x8350.
|
