Apartment Market Improves Slowly, Vacancies Remain High

The apartment market showed signs of improvement in the third quarter, but vacancies and rent levels remain low, according to the National Multi Housing Council’s latest Quarterly Survey of Apartment Market Conditions.

The survey found that the index for rents and vacancies remained below 50,which indicates conditions are worsening. However, market tightness showed improvement over the second quarter, rising from 20 to 31.

Nearly half (49 percent) said markets were looser (with higher vacancies and lower rents), while 11 percent said markets were tighter. This was the ninth straight quarter in which the index remained below 50, but the fourth consecutive quarter in which the index measure has risen. For the year, the Market Tightness Index averaged 20, the lowest on record (since 1999).

The survey showed increased sales activity and improvements in the availability of debt and equity capital compared with three months ago. The Sales Volume Index hit its highest level in four years, while the Equity and Debt Financing Indexes were the highest in three years.

“The broad improvements in sales volume and debt and equity financing suggest the transactions market may finally be thawing,” noted NMHC Chief Economist Mark Obrinsky. “Nearly half (45 percent) of respondents indicated that the gap between what sellers are asking for and what buyers are offering-the bid-ask spread-has narrowed.”

“But the economic headwinds remain strong,” Obrinsky added, “as the employment market continues to sag, demand for apartment residences continues to slip. Though this quarter’s Market Tightness Index is improved compared to last quarter, it still indicates higher vacancies and lower