WASHINGTON, DC-A weakening economy is beginning to impact the multihousing sector, which up until recently had been able to withstand capital market headwinds thanks to GSE support and a beleaguered single family home market. So says the latest National Multi Housing Council's Quarterly Survey of Apartment Market Conditions. Its Market Tightness Index, which measures changes in occupancy rates and/or rents, dropped from 40 last quarter to 24.

This was the fifth straight quarter in which the index has been below 50. Generally speaking, a score of 50 can be interpreted to mean that conditions in the market are unchanged. Anything less suggests that they are worsening. However it wasn't until this survey that the majority respondents said conditions were worsening--despite the under 50 reading. In the previous four quarters, roughly half of respondents viewed market conditions as unchanged; this quarter less than one-third reported unchanged conditions.

Rising unemployment is taking a toll on the sector, NMHC concludes. "Nine straight months of job losses have begun to cut into the demand for apartment residences," Mark Obrinsky, NMHC's vice president of research and chief economist, says in a prepared statement. "While favorable demographics and a lower homeownership rate will benefit the apartment industry over time, owners and managers will first have to work their way through the current economic downturn before the benefits of that increased demand are likely to show up." Until then, he says, expect to see more renters doubling up with roommates, moving back in with parents, or crashing on the proverbial friend's couch. NMHC did not return a call to GlobeSt.com in time for publication.

"Unlike other commercial real estate sectors, such as offices and hotels, the apartment sector has benefited from continued debt capital availability through Fannie Mae and Freddie Mac," Obrinsky also notes. "That capital source is not sufficient to protect apartments from the current credit crisis, however."

Other indexes in the report also point to eroding fundamentals. The Sales Volume Index dropped to five, the lowest on record and the 12th consecutive quarter in which the index has been under 50; 90% of respondents said sales volume was lower.

The Equity Financing Index declined to four, another record low and the sixth consecutive quarter under the 50 mark. The Debt Financing Index declined by a third from the previous quarter to a record low of four, the sixth consecutive quarter where the index reading was under 50. In both indexes, 93% of the respondents said that financing was less available.

NMHC's Quarterly Survey posed a new question this time, asking whether the credit crisis has affected current and/or planned activities. Only one-sixth of respondents said that the crisis hadn't affected their current activities yet--but even those respondents indicated that the crisis is affecting their future activities.