Rental Market Continues to Strengthen

June 6, 2013

The most recent data from the Survey of Market Absorption of Apartments (SOMA) showed that completions of privately financed, nonsubsidized, unfurnished rental apartments continued to climb in the fourth quarter of 2012. The reported 31,600 completions in buildings with 5+ units were slightly above the third quarter level and more than doubled since the fourth quarter of 2011. At the same time, the absorption rates (units rented or sold after construction of the property is complete) remained high, close to 65 percent. Averaged over 2012, the apartment absorption rates reached 64 percent, a level not seen since 2001.

rentals

The condo and co-ops completions remained at historically low levels – only 1,800 units were completed in the fourth quarter of 2012. However, the condo absorption rates improved remarkably. About 78 percent of the condominiums completed in the fourth quarter of 2012 were sold within three months of completions. This rate is 20 percent higher from the previous quarter and 33 percent higher from a year ago.  Over 2012 the condo absorption rates have averaged around 66 percent, marking the highest reading since 2006. Leaner inventories should bolster condo and co-op construction activity going forward, but we expect these units will maintain a diminished share of overall 5+ multifamily production.

condo

The SOMA also reported that approximately 8,100 federally subsidized or tax credit units were completed in the fourth quarter of 2012. This represents a decline of 3,400 units since the previous quarter and 4,100 since a year ago.

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Multifamily Vacancy Index Stays in the Low 30s

March 8, 2013

In the fourth quarter of 2012, NAHB’s Multifamily Vacancy Index (MVI), which measures property owners’ confidence in the strength of the market for existing rental apartments, improved slightly—falling two points to 31. Because the MVI captures the industry’s sentiment about apartment vacancies, lower numbers are better.

After peaking at 70 in the second quarter of 2009, the MVI declined consistently through 2010 and has remained at a fairly low level in the low to mid 30s throughout 2011 and 2012.  So, in this respect, the fourth quarter gave us more of the same.

Historically, the MVI has tended to foreshadow the Census Bureau’s measure of rental vacancies in buildings with 5 or more apartments.  When conditions are changing, the MVI generally turns at least one quarter before the 5+ vacancy rate.MVI 12 Q4

Recently, both measures have been edging downward.  At 31, the MVI is currently as low as it’s been since NAHB initiated the survey in 2003, while the 5+ vacancy rate has dipped below 9 for the first time since 2000.

The MVI is one of two main sentiment indices produced from NAHB’s quarterly survey of multifamily developers, property owners, and managers; the other being the Multifamily Production Index (MPI). For more information, including a complete history for both indices and all of their components, see NAHB’s web page for the MPI & MVI.


NAHB MVI Indicates Healthy, Stable Market for Existing Rental Apartments

December 12, 2012

In the third quarter of 2012, NAHB’s Multifamily Vacancy Index (MVI) improved 3 points to 33, largely offsetting the previous quarter’s 5 point swing in the other direction.  The MVI is a measure of property owners’ sentiment about vacancies in existing rental apartments, so lower numbers are better.

MVI 12Q3After hitting a record high of 70 in the second quarter of 2009, the MVI began to improve consistently, until dropping to 33 at the end of 2010.  For the past two years, the MVI has remained fairly stable in the low-to-mid 30s, which is as low as the vacancy index has ever been (the data go back to 2003).

When conditions are changing, the MVI generally turns at least one quarter before the Census Bureau’s hard measure of rental vacancies.  In 2009, improvement in the Census rate of vacancies in buildings with at least 5 apartments began one quarter after the MVI and was much more gradual.  Since then, the 5+ rental vacancy rate has continued its gradual drift downward, and at 9.1 is now as low it’s been since 2000.

With both the MVI and 5+ vacancy rate currently at healthy levels, there’s no strong reason to suspect either will change drastically in the near future.

The MVI is one of two main sentiment indices produced from NAHB’s quarterly survey of multifamily developers, property owners, and managers; the other being the Multifamily Production Index (MPI).  For more information, including a complete history for both indices and all of their components, see NAHB’s web page for the MPI & MVI.