Builders Less Confident in Rental Apartment Market
Builder confidence in the rental apartment market sagged in the fourth quarter of 2007, according to the latest results of NAHB’s Multifamily Rental Market Index (MRMI), which was released on March 5.
“The housing market is undergoing a significant correction and that is affecting all segments of the industry, both multifamily and single-family, for-rent and for-sale,” said NAHB Chief Economist David Seiders. “The excess inventory has to be absorbed in order to restore balance to the housing markets.”
The MRMI is derived from a quarterly survey of multifamily builders and developers; their responses are rated on a scale of 0 to 100, with a rating of 50 generally indicating an equal number of positive and negative responses.
For last year’s fourth quarter, the components of the index tracking current supply conditions for market-rate and lower-rent apartments were 40.0 and 45.3, respectively, down from 59.8 and 48.7 the same time a year earlier.
Fourth-quarter expectations for the next six months registered 50.0 for market-rate apartments and 48.9 for lower-rent properties, down from 69.5 and 59.5 for the same three months of 2006.
The component of the index tracking demand for Class A apartments dropped by 15.8 points in the fourth quarter from a year earlier, from 59.2 to 43.4. The index for Class B apartments slipped 6.4 points, from 55.1 to 48.7; and Class C apartments remained essentially unchanged at 58.3, down from 58.6.
Survey respondents reported that they were using incentives and concessions to shore up demand as the number of calls from prospective renters slowed during the fourth quarter, and the component of the index tracking net rents dropped sharply, to 47.5, down from 61.3 a year earlier.
While less optimistic than a year earlier, builders in last year’s fourth quarter expected apartment market conditions to improve. Expectations for demand over the coming six months registered 50.0 for Class A apartments, 53.9 for Class B and 61.1 for Class C.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.