A new rental market report comes with four relatively flat quarter-to-quarter indexes and most apartment executives saying conditions over the first quarter are the same or worse for landlords.
When considering year-to-year comparisons, the report also reveals declines in all but one of the same four indexes.
The latest National Multihousing Council (NMHC) Quarterly Survey of Apartment Market Conditions (April 2007) reveals a mixed apartment market that can't seem to sustain a steady recovery, but the council remains bullish on the rental sector.
"The apartment markets continue to enjoy largely favorable conditions," said NMHC chief economist Mark Obrinsky.
"Although both owners and managers are well aware of the 'shadow rental market’' -- condos and single-family homes originally intended for sale but being rented out instead -- any supply spillover from the for-sale market has so far not exceeded the growing demand for apartment residences."
The report's bright spot shows the demand for apartments grew from quarter-to- quarter for 15 consecutive quarters, indicated by a Market Tightness Index of more than 50 that has been sustained since August 2003. That is, since August of 2003, more respondents said market conditions were better, in terms of demand and other factors, than those who said it was worse, from one quarter to the next, for 15 quarters.
The NMHC's survey results come from a survey of CEOs and other senior executives of apartment-related firms nationwide who serve on NMHC's board of directors or advisory committee.
A first quarter statistical analysis from Novato, CA-based RealFacts.com seemed to support NMHC's bullish approach when RealFacts.com revealed year-over-year rising rents in all but one of the 29 metropolitan areas it tracks, markets largely west of the Mississippi River, but also in Florida and Illinois.
However, while the bull may be slowly running through some markets, there's also a fly in the ointment -- rental supplies.
The Market Tightness Index, a measure of vacancy and rent movement, came in at 56 in the April report this year, only slightly changed from 54 a quarter ago and much lower than the 83, a year ago.
A reading for the index above 50 indicates that, on balance, apartment markets around the country are getting tighter with fewer vacancies and rents trending up. A reading below 50 indicates that market conditions are getting looser with more vacancies and lower rents. A reading of 50 indicates that market conditions are unchanged.
A closer reading of the index reveals, while 34 percent of the respondents said vacancies fell and rents rose during the first quarter, the majority, 65 percent, said the market was unchanged (43 percent), getting looser (22 percent) or that they didn't know (1 percent) which way it was going.
The remaining three indexes also revealed mixed market uncertainty.
The Sales Volume Index came in at 38, down from 41 a quarter ago but up from 35 a year ago. Only 13 percent said sales of apartment properties were higher than last quarter, while 37 percent said they were lower, 48 percent said they were unchanged and 3 percent didn't know.
The Equity Financing Index in the latest report was 53, down from 56 a quarter ago but up from 50 a year ago. Only 13 percent said equity financing is more available than three months ago, 6 percent said less, 71 percent said the financing was unchanged and 10 percent didn't know.
The Debt Financing Index came in at 54, down, from 56 a quarter ago and vastly improved from 21 a year ago. Fifteen percent of respondents said now is a better time for multifamily mortgage borrowing than it was three months ago, but 8 percent said it is a worse time, while 70 percent said conditions are unchanged and 8 percent didn't know.
The now mixed rental market had been well on its way to a speedy recovery after being overshadowed for years by a housing boom.
However, as the housing boom went bust, and rents rose, a renters' backlash put the breaks on the rental recovery.
Also, a growing number of condos and other homes that languished empty and unsold on the market, unexpectedly added to the rental supply, further stunting rental market growth.
The U.S. Census Bureau recently reported that the rate of home ownership slipped to levels not seen in more than three years as a record-level of empty homes -- many listings-cum-rentals -- piled up across the nation.
The rate of home ownership in the first quarter this year slipped to 68.4 percent, the lowest level since the third quarter of 2003. The rate has been slipping since the record high rate of home ownership last hit 69.2 percent in the fourth quarter 2004.
Experts blame the falling rate on the housing market's post-boom bailout forced on some home owners saddled with risky mortgages and on the chosen bailout of others, often investors moving onto greener pastures.
Due, in part, to the extra rental supply, the Census report said rental vacancy rates rose to 10.1 percent in the first quarter this year, up from 9.5 percent a year ago.
Hardest hit were the suburbs (compared to urban areas) where the rental vacancy rate rose from 8.7 percent to 10.1 percent, during the same period, and the South (compared to three other geographical regions), where vacancies rose from 10.9 percent to 13.1 percent, also from the first quarter 2006 to the first quarter 2007.
