A hot housing market and sluggish employment gains hasn't been enough to keep the rental market from four consecutive quarters of improvements in key indicators.

That means growing numbers of renters will find higher rents, fewer concessions and more competition for high-end apartments than they have in recent years.

With steady improvements in occupancy rates, sales volume, debt and equity availability, the National Multi Housing Council is ready to call it.

"With a record two-thirds of respondents noting tighter market conditions, I think it's time to say that the apartment market has completed its recovery," said the council's chief economist Mark Obrinsky.

"That's a significant achievement in the face of two powerful headwinds: the surge in home ownership and the most sluggish job market recovery on record," he added.

In recent years, the desire for physical shelter to call their own, a yen for a return on their money and the abundance of cheap financing to leverage the deal has send sent renters in droves to the home buying market and pushed the rate of home ownership to 70 percent.

The Office of Federal Housing Enterprise Oversight (OFHEO) said home prices had appreciated at an average 12.5 percent nationwide during the first quarter (the latest numbers available) and Freddie Mac put the median rate of appreciation at 23 percent during the second quarter.

Meanwhile, the Bureau of Labor Statistics reported the national unemployment rate inched down in June to 5.2 percent from 5.8 percent a year ago as job creation continues at a snail's pace.

The multi-housing council reported for the second quarter:

• Measuring changes in vacancy rates, the council's Market Tightness Index rose to a record-level high of 80 in July -- the eighth consecutive quarter senior apartment executives reported lower vacancy rates and/or higher rents over the last 90 days. An index of 50 means most respondents saw improving conditions over the past three months.

• A record 41 percent of respondents said apartment building sales volume improved in their markets over the past 90 days, while a near-record low nine percent of the executives indicated lower volume resulted in the Sales Volume Index rising to a record 66. That's the ninth straight quarter of increasing sales volume.

• The Equity Financing Index, at 61, was a bit below levels recorded in two previous quarters, but a score above 50 means more respondents saw improving conditions than saw worsening conditions over the past three months.

• The Debt Financing Index came in virtually unchanged at 53, but was the fourth straight quarter of improving conditions (lower rates, greater availability, or both) for mortgage finance.

The rosy national picture doesn't tell the whole story as the Western region and some pockets still struggle with flat or falling rents and high vacancy rates, according to Novato, CA-based RealFacts.

"Our survey does not tell us anything about individual metro areas, or even about larger regions. We only get information on overall national trends. It is to be expected that not all metro areas are exactly in line with the national averages," Obrinsky told RealtyTimes.com.

"When I say 'The recovery is complete,' I don't mean that this is as good as it gets. Rather I mean only that we're done with the first phase in the cycle, and are now moving on to the expansion phase," he added.

Published: August 4, 2005

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