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Multifamily Stocks at Record High on NAHB Index
The stocks of publicly traded companies whose primary business is multifamily housing outpaced the market as a whole in August, pushing the NAHB Multifamily Stock Index (MFSI) to its highest reading ever.
"I think the confidence in the market reflects the strong fundamentals for the rental side of the multifamily industry right now," said Leonard Wood, director of Wood Partners, LLC and chairman of NAHB's Multifamily Leadership Board. "In many markets across the country, the supply of new rental units has not kept up with demand and that is pushing up occupancy rates, rents and profits."
The index tracks the total returns (including capital gains and dividends) of 24 publicly traded firms principally involved in the ownership and management of apartments. During the month of August, the MFSI reached a record 3,328, almost 30% higher than it was a year ago. In comparison, the S&P 500 index with dividends reinvested gained 2.4% in August, about 9% higher than it was a year ago.
The latest increase in the MFSI dramatically widened the performance gap — or percentage difference — between the two indexes, with the MFSI outperforming the S&P 500 with dividends by 178%. In the 46 months since it reached its low point in late 2002, the S&P 500 has increased by 72%. During the same period, the MFSI rose 134%.
In addition, the MFSI has dramatically outperformed the S&P 500 over even longer time periods. Since December 1998, the MFSI has risen by 232% compared to only a 19.6% gain by the S&P.
"Many of these companies were able to take advantage of the condo boom over the last several years, and now that the for-sale market is cooling, they can expect a strong performance from their rental apartment operations," said Elliot Eisenberg, a housing policy economist at NAHB and creator of the index. "In addition, the Real Estate Investment Trusts, or REITs, which make up the majority of the companies tracked by the index, are well-capitalized and have increasingly strong bottom lines."
The MFSI appears monthly in NAHB's electronic newsletter Multifamily Market Outlook. For more information about NAHB Multifamily, click here.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.
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