iStock illustration
Apartment market conditions are more favorable in terms of debt financing and sales volume, but equity financing continues to be less available than prior quarters amid continued high interest rates, according to the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions for July 2024.
The national-level survey showed mixed results for apartment market conditions. While the debt financing (63) and sales volume (57) indexes indicated more favorable conditions this quarter, equity financing (49) and market tightness (47) came in below the breakeven level of 50.
“Concessions have become commonplace in markets with elevated levels of deliveries, as survey respondents reported overall looser market conditions for the eighth consecutive quarter,” Chris Bruen, NMHC Economist and Senior Director of Research, said in a statement. “Yet, this has not been for a lack of demand, which is helping to absorb this new supply at a healthy pace.”
The market tightness index came in at 47 this quarter, indicating looser market conditions for the eight consecutive quarter. However, half of respondents thought market conditions were unchanged compared to three months ago while 27 percent thought markets have become looser, down from 37 percent in April.
The equity financing index came in at 49, just under the breakeven level (50), making this the tenth consecutive quarter in which equity financing became less available than three months prior. Sixty percent of respondents reported availability of equity financing to be unchanged from three months ago.
The sales volume index showed a second straight quarter of increasing deal flow after seven consecutive quarters of decline with a reading of 57. 46 percent of respondents reported sales volume to be unchanged from three months ago, while 32 percent of respondents reported higher sales volume this quarter.
The debt financing index reading of 63 indicated more favorable conditions for debt financing compared to three months ago. 44 percent of respondents felt debt financing conditions were unchanged, while 37 percent indicated belief that now was a better time to borrow than three months ago.
“The 10-Year Treasury yield fell 25 basis points (bps) over the past three months as inflation edged closer to the Federal Reserve’s 2 percent target and the labor market began to show some signs of cooling,” Bruen said in a statement. “This has led to more favorable conditions for debt financing and a second straight quarter of increasing sales volume, even while a plurality of respondents report unchanged conditions.”
Although 45 percent of respondents thought opportunities for apartment transaction were about the same as three months ago, 28 percent believed there were more properties that would fit their transaction criteria compared to three months ago. 19 percent believed there were fewer properties that would fit their transaction criteria.
The July 2024 Quarterly Survey of Apartment Market Conditions was conducted from June 26 to July 16. 174 CEOs and other senior executives of apartment-related firms nationwide responded. The reported index numbers are based on data compiled from the quarterly surveys of NMHC members. The indexes are calculated by taking one-half the difference between positive (tighter markets, higher sales volume, equity financing more available, a better time to borrow) and negative (looser markets, lower sales volume, equity financing less available, a worse time to borrow) responses and adding 50.
