Mark Obrinsky

WASHINGTON, DC—Fundamentals remain solid for the multifamily asset class in the second quarter of 2014, according to the National Multifamily Housing Council’s quarterly survey of Apartment Market Conditions. That observation includes a still-favorable supply-demand dynamic for owners and developers—an issue that is raised more and more often as the apartment industry recovery heads into its fourth year.

For the moment, though, all is well, says NMHC Senior Vice President of Research and Chief Economist Mark Obrinsky in a prepared statement. “Most markets appear to be absorbing new supply with no downward pressure on rents or vacancies,” he says. “The increase in demand continues to outstrip the pickup in new supply.”

The NMCH showed growth in all four indexes that make up the survey, with the market tightness (68), sales volume (56), equity financing (58) and debt financing (68) indexes all posting quarter over quarter improvements. In addition, this quarter’s survey marked the second quarter in a row with those four categories posting above the breakeven level of 50.

Other trends the survey picked out included the still strong propensity for urban development, compared to suburban development in the last six months, with four in ten, or 43%, reporting an increased share in urban development, compared to one-quarter, or 27%, reporting an increased share of suburban development.

Interestingly, the development that is taking place in the suburbs is mimicking the styles that are so popular in the cities—namely town-center type projects.

Findings from the survey included:

  • A rise in the Market Tightness Index from 56 to 68. The percentage of respondents who saw looser conditions continued to decline, down from 20% to 15%.
  • A slight increase in the Sales Volume Index from 52 to 54. About half, or 51%, of respondents felt that sales volumes were unchanged from three months earlier; almost one-third of responses (29%) reported a higher sales volume, and 16% reported a lower number of sales.
  • The Equity Financing Index rose five points to 58, with the majority of respondents at 56% reporting that the availability of equity financing is unchanged from three months ago.
  • The Debt Financing Index increased to 68 from 63. Almost one-third (30%) believed that conditions are better, and only 3% felt that conditions were worse, a marked decline from January’s Quarterly Survey, when 30% felt conditions were worse.