Changing Climate
A new NMHC survey says sales are dwindling.
The good news: The market tightening that some have forecast for months is still at bay, with numbers holding steady, according to a recent survey by the National Multi Housing Council.
The inevitable bad news: Borrowing conditions have taken a sharp turn for the worse, and the trend may continue. “It’s clearly a signal that mortgage rates have gone up,” says Mark Obrinsky, chief economist and vice president of research for the NMHC in Washington, D.C.
Each quarter, NMHC surveys members about four key aspects of market conditions for the apartment industry: market tightness, debt financing, sales volume, and equity financing. Results are reported in an index format. A score above 50 means conditions are improving. A score of 50 means no change; below 50 means things are worsening.
The most recent survey, done in April and early May, found little perceived change in market tightness and availability of equity financing but substantial drops in sales volume and ease of debt financing.
The best news for owners may be that the market tightness index remained at 83. This was the fourth straight quarter the index was at or above 80, and the trend is expected to continue. “We’re still early in the cycle of tightening,” Obrinsky says.
The biggest reported drop was in debt financing, which plummeted to 21 from 48. Sixty-nine percent of respondents said that borrowing conditions had worsened.
The sales volume index also fell, with 40 percent of respondents saying that sales in their markets were lower than three months ago. These responses knocked the index down to 35, its lowest mark in more than four years.
The equity financing index was at 50, meaning the conditions were generally the same as three months ago.
–Les Shaver