Strong condo demand and signs that the rental apartment market finally is emerging from its slump fueled the confidence of multifamily builders in the first quarter of this year, according to the latest Multifamily Market Index (MMI), released Wednesday by the National Association of Home Builders.
The MMI’s component index gauging current market conditions for for-sale units jumped to 64 in the first quarter, up from 46.7 in the first quarter of 2003. The indexes gauging current market conditions for low-income (subsidized) and market-rate apartments both were well above their levels of a year earlier, at 49.4 and 48.1, respectively.
“The condo market continues to benefit from favorable interest rates and solid price appreciation, while stronger job growth is helping the apartment market,” said NAHB President Bobby Rayburn, a home and apartment builder from Jackson, Miss.
The MMI is based on a quarterly, nationwide survey of multifamily builders and property owners who are asked a series of questions about current market conditions and expectations for the next six months. Survey answers are assigned numerical values to calculate two separate indexes, one tracking demand and the other tracking supply. The scale is from 1 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.
Builders reported fewer empty apartments available for rent. Prospective renters also are calling more frequently–the current index value for this key indicator of rental demand stood at 56.2 in the first quarter, which is 7 points higher than at the same time last year. All types of apartments reported more demand this quarter, but luxury (class A) apartments have rebounded most strongly – that index value of 46.5 represents a nearly 17-point improvement in reported demand over last year.
Looking forward, multifamily builders expressed optimism regarding the next six months, with the index tracking expected market conditions for market-rate apartments rising 16 points over this time last year to an index number of 57.1. The low-income (subsidized) apartment producers also report optimism, with a 51.8 index score, up from 50 last year. The condo market’s 55.3 index number reflects a 7-point improvement over 12 months ago.
“The evolving upswing in the job creation numbers bodes well for the multifamily sector,” noted NAHB Chief Economist David Seiders. “Since job creation often leads to new household formation–and new households often tend to be renters or first-time condo buyers–it looks like there are better days ahead for the multifamily segment of the housing market.”
The National Association of Home Builders is a Washington-based trade association representing more than 215,000 members.
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