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Condos Decline, Credit Tightens in First Quarter
Continuing to reflect a contracting market, multifamily builders and developers surveyed for NAHB’s Multifamily Condo Market Index (MCMI) reported that current conditions for this year’s first quarter were down to roughly half of what they were for the same period a year earlier — declining from 29.6 to 15.2.
Expectations for the next six months also saw significant erosion – from 32.9 during the first quarter of 2007 to 29.7 for the first three months of 2008.
“As condo development has slowed sharply, the heavy inventory overhang is being absorbed to some degree — some going to owner/buyers and others into the rental market,” said NAHB Chief Economist David Seiders. “As mortgage credit once again flows to truly qualified prospective buyers, the market will slowly climb back into balance.”
The MCMI is reported 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.
The component of the index that gauges current conditions in the condo market has been below 25 for the past five quarters. However, a component on the traffic of prospective buyers rose in this year’s first quarter to its highest level since that part of the index was introduced in early 2006, indicating that buyers are waiting in the wings and ready to buy once they believe the market is approaching bottom.
Responding to a series of special questions on credit and lending, none of the respondents said that there was more credit available for multifamily construction in the first quarter of 2008 than in the final quarter of last year.
About 19% said the lending situation was “about the same,” while 81% indicated that it had worsened from the previous quarter, primarily because lenders had lowered the allowable loan-to-value ratio or had reduced the amount they were willing to lend.
Forty-four percent of those surveyed said they did not even seek credit during the first quarter.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.
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