All four indexes of the National Multi Housing Council’s (NMHC) October Survey of Apartment Market Conditions dipped below 50 for the first time since July 2009. Market Tightness (46), Sales Volume (46), Equity Financing (39) and Debt Financing (41) all indicated declining conditions from the previous quarter.

“After four years of almost continuous improvement across all indicators, apartment markets have taken a small step back,” said Mark Obrinsky, NMHC’s Vice President of Research and Chief Economist. “Conditions cannot continue to improve indefinitely and new development is at least somewhat constrained by available capital—though more on the equity than the debt side. Even so, both the Market Tightness and Sales Volume Index are within hailing distance of the breakeven level and the Debt Financing Index rose despite some rise in interest rates. This bodes well for the apartment industry going forward.”

Key findings include:

• Opinions are mixed regarding the availability of capital for new development. A total of 77 percent of respondents regarded construction debt financing as widely available—34 percent think both equity and debt financing are widely available, while 43 percent think construction loans are widely available but equity capital for new development is constrained. Only 36 percent think equity capital is widely available. [Note: this is excluding those respondents that chose “Don’t Know/Not Applicable”].
• Market Tightness Index fell to 46 from 55. Two-thirds of respondents (67 percent) saw no change in market tightness (higher rents and/or occupancy rates) compared with three months ago. One-fifth of respondents (up from 14 percent in July) felt that markets were looser than three months ago, while 13 percent saw tighter markets.
• The Sales Volume Index remained at 46. Almost one-third (32 percent) of respondents saw a lower number of property sales, compared with almost one-quarter (24 percent) who said sales volume was unchanged. A plurality of 44 percent regarded sales volume as unchanged.
• The Equity Financing Index dipped to 39. Sixty percent viewed equity financing as unchanged—this was the tenth consecutive quarter in which the most common response was that equity finance conditions were unchanged from three months ago. By comparison, 27 percent of respondents viewed conditions as less available and only 5 percent viewed equity financing as more available.
• Debt Financing Index rose 21 points to 41. Almost one quarter of respondents (22 percent) viewed conditions as better from three months ago, a sizable increase from eight percent last quarter. Forty-one percent of respondents believed now is a worse time to borrow, down from 67 percent in July.

Full survey data is available www.nmhc.org/goto/61291

About the survey:The October 2013 Quarterly Survey of Apartment Market Conditions was conducted October 7-16, 2013; 64 CEOs and other senior executives of apartment-related firms nationwide responded.  The survey was conducted by the National Multi Housing Council.