Second Quarter Apartment Markets Mixed in Latest NMHC Survey


WASHINGTON, D.C. – July 24, 2013 – (RealEstateRama) — While demand for apartment homes remained strong, rising interest rates exerted negative pressure on the industry’s ability to secure debt financing according to the National Multi Housing Council’s (NMHC) July Quarterly Survey of Apartment Market Conditions. Only the Market Tightness Index (55) remained above the breakeven line of 50 this quarter. Sales Volume (46) and Equity Financing (49) dipped, with Debt Financing dropping sharply to 20.

“Debt costs for apartment firms have been rising. In addition to the 90 basis point increase in interest rates from the April survey, spreads over Treasuries have also gone up, likely dampening transactions somewhat. Rates are still low by historical standards, however, and at current levels should not put too big a crimp in apartment activity going forward,” said Mark Obrinsky, NMHC’s Senior Vice President for Research and Chief Economist. “Underlying demand trends remain strong, and we are approaching the cusp of a meaningful increase in supply that will hopefully be enough to meet the current need for apartment homes.”

Key findings include:

  • Construction costs are rising nationwide. More than two-thirds (68 percent) of respondents indicated that construction costs had increased by more than 5 percent since last year. Another 29 percent indicated construction costs had increased over a year ago, but by less than 5 percent. [Note: These figures exclude the 16 percent of respondents who answered “don’t know.”]
  • Market Tightness Index edged up to 55 from 54. Just 14 percent noted looser conditions in the markets they were familiar with. This represents the 13th time in the last 14 quarters in which the index was over 50.
  • The Sales Volume Index dropped from 55 to 46. This was the second time in the last three quarters in which the Sales Volume Index was below 50, though just by a little. Over the last eight quarters, the index has averaged 52, suggesting a small pickup in volume over that time.
  • The Equity Financing Index dropped 7 points to 49. This was the first sub-50 reading in the last four years. Forty-nine percent viewed equity financing as unchanged. Twenty-one percent of respondents viewed equity financing as more available while 22 percent viewed equity financing as less available.
  • Debt Financing Index dropped sharply to 20 from 59. Two-thirds (67 percent) of respondents indicated that debt financing conditions had worsened since April, and 21 percent considered conditions unchanged. Only 8 percent of respondents thought debt financing conditions had improved – the lowest figure since October 2008.

Full survey data are available at

About the survey: The July 2013 Quarterly Survey of Apartment Market Conditions was conducted July 8-July 15, 2013; 70 CEOs and other senior executives of apartment-related firms nationwide responded.

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Based in Washington, D.C., NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S. NMHC’s members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers and financiers. One-third of Americans rent their housing, and over 14 percent live in a rental apartment. For more information, contact NMHC at 202/974-2300, e-mail the Council at ">, or visit NMHC’s web site at

Jim Lapides, 202/974-2360,

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