July apartment market survey shows conditions ‘barely’ tightened

in Estimated risk per 21.07.2022 10:29:00

From the National Multi-Housing Council (NMHC): Higher interest rates are starting to affect apartment buildings

According to the July 2022 National Apartment Building Council’s Quarterly Review of the State of the Apartment Market, apartment sales have fallen while both equity and debt financing have become more costly. However, demand in most markets was still strong compared to supply.

“Continued interest rate hikes by the Fed have resulted in higher long-term rates and a higher cost of both debt and equity,” said NMHC chief economist Mark Obrinski. “While these higher rates have reduced investor returns, many sellers are reluctant to cut prices, resulting in a sharp drop in sales volume.”

The apartment market recorded a sixth consecutive quarter of tightening conditions, albeit a slight one.. Fifty-six percent of respondents reported that conditions had not changed, while those who reported tougher conditions slightly outperformed those who reported softer market conditions.”

Market Integrity Index entered 51, just above the break-even level of 50. This indicates that market conditions have become tighter, albeit with significant differences depending on the market. Twenty-three percent of respondents reported that markets were tighter than they were three months ago, compared to 21 percent of respondents who saw weaker conditions in the markets they watch. At the same time, more than half of the respondents (56%) believe that the conjuncture of the apartment market has not changed compared to the previous quarter.

Apartment tightness index
Click on the graph to enlarge the image.

This graph shows the quarterly apartment tightness index. Any value above 50 indicates tighter conditions compared to the previous quarter.

Although the index declined in July, this indicates a slight tightening in market conditions in July for the sixth straight quarter.

This suggests that rent growth will slow down.