Job Losses, Tight Credit Erode Confidence in Apartments
The deepening recession and ongoing credit crunch continue to drag down builder confidence in the multifamily housing market, according to the latest results of NAHB’s Multifamily Rental Market Index (MRMI) and Multifamily Condo Market Index (MCMI), which were released on Feb. 11.
"Job losses and tightening credit continue to depress current and future multifamily construction," said David Crowe, NAHB's chief economist. "Without job growth as a demand driver for rental apartments, new construction is declining. And without access to credit, the pipeline for future construction is running dry."
The component of the MRMI that gauges supply conditions sank dramatically in the fourth quarter of 2008 to 22.4 for affordable apartments and 18.6 for market-rate apartments, compared to 45.3 and 40.00, respectively, for the same period a year earlier.
On the condo side, the supply component fell 11 points from the fourth quarter of 2007, hitting a new record low of 7.8.
NAHB's Multifamily Market Indexes are derived from quarterly surveys of multifamily builders and developers. The index is on a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.
Looking ahead six months, builders and developers in last year’s fourth quarter were only slightly less pessimistic.
The MRMI component tracking builder expectations for the supply of affordable rentals was at 28.6, down from 48.9 in the fourth quarter of 2007. Confidence in future market-rate rentals was less than half its year-earlier level — falling from 50 to 22.5.
On the MCMI, the index gauging expectations for condo supply dropped from 29.2 in the final quarter of 2007 to a lowly 13 for the final three months of 2008.
On the demand side, the components of the MRMI tracking current conditions for every class of rental apartment — affordable, moderately priced and luxury market-rate — all fell below 50 for the fourth quarter of 2008.
The index for Class A apartments declined 19.9 points from fourth quarter to fourth quarter, to 23.5. Demand for moderately priced and affordable apartments fared only slightly better, slipping 11.6 points and 15.9 points respectively to 37.1 and 42.4.
Other indicators also remained weak at the end of last year. Traffic among potential renters and condo buyers was down, vacancy rates for apartments were up and asking rents were on the decline. For the fourth quarter of 2008, asking rents were at 41 on the index, their lowest level since the inception of the series in 2003.
According to NAHB Chief Economist David Crowe, the excess inventory of unsold single-family houses and condos is casting a shadow over every sector of the housing market.
For more information about this survey, e-mail Ann Marie Moriarty, or call her at 800-368-5242 x8350.