MultiFamily Market Outlook - 01/12/2007 (Plain Text Version)

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In this issue:
Multifamily for Older Residents Demands Different Features and Meets Different Needs
Starts Rise, but Continue to be Sluggish
Real Rents Hit Record High...Again
Growth in 2007 Will Remain Weak, but Will Pick Up in 2008
Multifamily Stocks Drops, S&P Improves Slightly

Real Rents Hit Record High...Again

In November, for the second month in a row, the Real Rent Index set a record high. After surging a full point from 108.0 to 109.0 in October, the index (which adjusts changes in residential rents for overall inflation) rose another 0.4 point to reach 109.4. Contributing to the increase was an overall CPI (the denominator of the index) that remained perfectly flat.

In addition, however, the residential rent component of the CPI (the numerator of the index, which is based on rents for single family as well as multifamily housing units) continued to rise at a rate of more than 4% a year--the sixth month in a row this has happened.

Based on seasonally adjusted Consumer Price Indices; U.S. Department of Labor, Bureau of Labor Statistics. The annual rates indicate what the percentage change would be if the current monthly rate were sustained over a 12-month period. The real rent index is the CPI for rent of primary residence divided by the CPI for all items and scaled so that January 1995 is 100.

Reasons for recent strength in rental markets include relatively strong demand (employment growth has been solid, and sluggish home sales suggest that the market balance may be tilting at least slightly away from owner-occupied housing) and weak supply (see the feature on starts in this issue).