As the multifamily industry continues to cope with the ongoing COVID-19 pandemic, market conditions have weakened, according to the National Multifamily Housing Council’s (NMHC’s) Quarterly Survey of Apartment Market Conditions for July.
“Recent spikes in COVID-19 cases have caused many areas of the U.S. to scale back or completely reverse their attempts at reopening their local economy. As a result, unemployment levels stand elevated in double digits as much of the nation’s business activity remains temporarily shuttered,” said Mark Obrinsky, NMHC chief economist. “Amidst this COVID economy, 71% of respondents reported looser market conditions this quarter compared with the prior three months, marking the second consecutive quarter of deteriorating conditions.”
According to the survey, the Market Tightness Index rose from 12 to 19. Almost three-quarters of the respondents, 71%, cited looser market conditions than the previous three months, compared with 8% who reported tighter conditions.
The Sales Volume Index jumped from 6 to 18. The majority, 73%, of respondents, reported lower sales than the previous three months. Only 13% reported unchanged sales volume, and 8% reported higher sales.
The Equity Financing Index increased from 13 to 34. Nearly half, 49%, of respondents indicated equity financing was less available than in the previous three months.
The only index to move the needle over the breakeven mark of 50 this quarter, the Debt Financing Index jumped from 20 to 60. Of the respondents, 44% reported that financing conditions were more favorable. However, 25% indicated worse condition for debt financing compared with the previous three months, and 17% felt conditions were unchanged.
“The Federal Reserve has countered this economic malaise with aggressively accommodative monetary policy, resulting in historically low interest rates,” added Obrinsky. “This, in turn, has created favorable pricing for debt financing, leading more respondents than not in this round of the survey to report improving conditions for borrowing. Nevertheless, these improved financing conditions have been largely confined to stabilized multifamily assets, and underwriting standards remain fairly stringent.”