A January 2020 survey of multifamily-housing executives revealed that, even though plenty of capital is available, sales volumes within the U.S. apartment market continue to lag.
Results from the quarterly poll, conducted late last month by the National Multifamily Housing Council (NMHC), moved the latest reading of the NMHC’s Sales Volume Index further downward from 46 to 43. Index readings above 50 indicate that nationwide sales volumes are increasing, while readings below 50 signal decreasing sales.
Although 58% of the survey’s respondents reported unchanged sales volume, 28% had lower volumes than the prior quarter. Only 14%, meanwhile, indicated that their volumes had risen since October of last year, the lowest percentage of respondents with increased sales in 11 quarters.
“This reflects some seasonal decline along with the paucity of available deals. Some respondents also noted the negative impact of the new rent laws in New York,” said Mark Obrinsky, NMHC’s chief economist. New York lawmakers passed a sweeping overhaul of the state’s rent regulations in 2019, strengthening tenant protections but potentially blunting purchase interest in multifamily properties in New York City.
The NMHC’s component Market Tightness Index also saw a dip, falling from 54 to 48. Having the index reading fall beneath the break-even point (50) is the first sign of looser market conditions since January 2019.
“Apartment markets showed some softening in line with the slower leasing in the winter months,” Obrinsky said. “Even so, the Market Tightness Index reading of 48 was the highest January reading in five years, and slightly higher than the January average of 45 in the survey’s 21-year history.”
Financing within the multifamily market remains readily available, according to apartment executives. The NMHC’s Debt Financing Index decreased from 75 to 68 but remains well above the break-even level. Forty percent of survey respondents reported better conditions for debt financing compared to three months earlier, while 45% said that conditions haven’t changed. Only 5% felt that financing conditions were less favorable than in the previous quarter.
The NMHC’s Equity Financing Index, on the other hand, increased from 55 to 61 — the ninth consecutive quarter of improving or unchanged conditions. Twenty-seven percent of respondents felt that equity financing was more available than in the previous three months, while only 5% indicated that equity financing was less available. Fifty-eight percent responded that conditions in the equity market were unchanged.
