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Multifamily Execs Report Less Favorable Market Conditions

All four indices in the National Multifamily Housing Council’s (NMHC) Q4 survey of apartment conditions fell below breakeven levels, signaling less favorable apartment market conditions at the end of the year. Conducted in January, the survey polled 131 CEOs and senior executives of apartment-related firms nationwide.

NMHC economist and senior director of research Chris Bruen noted that Census Bureau data indicates more apartments were delivered in 2024 than in any other year since 1974.

“This surge in new supply continues to put downward pressure on rent growth and occupancy, especially in sunbelt markets,” Bruen said.

Federal Reserve officials have signaled that short-term interest rates will remain higher for longer as they work to combat inflation. Two rate cuts are expected in 2025. The 10-year Treasury yield rose 58 basis points between October and January, which has led to a higher cost of both debt and equity capital and lower deal flow in the apartment market, NMHC said.

The Market Tightness Index came in at 40 during the quarter – below the breakeven level of 50. This indicates looser market conditions for the tenth consecutive quarter. Just over half of respondents said they thought market conditions were unchanged from the previous quarter, while a third thought conditions have become looser and 14% thought market conditions were tighter.

The Sales Volume Index, which landed at 41, reflects decreasing deal flow over the past three months, said NMHC. This is the first time sales volume has decreased after three quarters of increasing deal flow. Only 16% of respondents thought sales volume was higher to end the year, down from 43% in October. About one-third thought sales volume was lower and 48% said sales volume was unchanged over the past three months.

After a brief stay above the breakeven mark during the month prior, the Equity Financing Index fell to 48 in January’s survey. Sixty percent of respondents thought availability of equity financing went unchanged over the past three months while 14% thought it was more available and 18% thought equity was less available.

The Debt Financing Index saw the largest shift from the previous quarter, dropping to 32 from 77 in October. This is a clear sign of worse conditions for debt financing, said NMHC. Forty-nine percent of respondents said now is a worse time to borrow than three months ago. Fourteen percent thought it was a better time to borrow and 34% thought debt financing conditions were unchanged.

Reprinted with permission from the Thursday, 23 January 2025 07:03:51 EST online edition of GlobeSt © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.