NMHC Quarterly Survey of Apartment Conditions (July 2016)

National Multifamily Housing Council
Quarterly Survey of Apartment Market Conditions
(July 2016)

	Market Tightness Index¹	Sales Volume Index²	Equity Financing Index³	Debt Financing Index⁴
July 2016	43	50	44	62
April 2016	43	53	45	50
January 2016	47	46	46	37
October 2015	53	53	52	54
July 2015	61	53	49	35
April 2015	58	52	55	60
January 2015	51	44	55	71
October 2014	52	58	54	71
July 2014	68	56	58	68
April 2014	56	52	53	63
January 2014	41	41	50	42
October 2013	46	46	39	41
July 2013	55	46	49	20
April 2013	54	55	56	59
January 2013	45	49	56	57
October 2012	56	51	56	65
July 2012	76	54	58	77
April 2012	74	57	62	65

The reported index numbers are based on data compiled from quarterly surveys of NMHC members. Survey responses reflect the change, if any, from the previous quarter. The indexes are standard diffusion indexes, hence are convenient summary measures showing the prevailing direction and scope of changes. They are calculated by taking one-half the difference between positive (tighter markets, higher sales volume, equity financing more available, a better time to borrow) and negative (looser markets, lower sales volume, equity financing less available, a worse time to borrow) responses and adding 50. This produces a series bounded by 0 (if all respondents answered in the negative) and 100 (if all respondents answered in the positive).

^{1 A Market Tightness Index reading above 50 indicates that, on balance, apartment markets around the country are getting tighter; a reading below 50 indicates that market conditions are getting looser; and a reading of 50 indicates that market conditions are unchanged.}

^{2 A Sales Volume Index reading above 50 indicates that, on balance, sales volume and the country is increasing; a reading below 50 indicates that sales volume is decreasing; and a reading of 50 indicates that market conditions are unchanged.}

^{3 An Equity Financing Index reading above 50 indicates that, on balance, equity finance is more available; a reading below 50 indicates that equity finance is less available; and a reading of 50 indicates that equity finance availability is unchanged.}

^{4 A Debt Financing Index reading above 50 indicates that, on balance, borrowing conditions are improving; below 50 indicates that borrowing conditions are worsening; a reading of 50 indicates borrowing conditions are unchanged.}

For the complete historical series, please visit www.nmhc.org/quarterlysurvey.

INDEX TRENDS

SURVEY QUESTIONS

Question #1: How are apartment market conditions in the local markets that you watch? “Tight” markets are defined as those with low vacancies and high rent increases. Conditions obviously vary greatly from place to place, but on balance, apartment market conditions in your markets today are:
	July 2016	April 2016	July 2015
Tighter than three months ago	18%	18%	37%
Looser than three months ago	31%	32%	14%
About unchanged from three months ago	51%	51%	49%
Don’t know or not applicable	0%	0%	1%

Question #2: What about sales of apartment properties in the local markets you watch? The sales volume (number of deals) currently is:
	July 2016	April 2016	July 2015
Higher than three months ago	23%	26%	28%
Lower than three months ago	22%	21%	22%
About unchanged from three months ago	48%	46%	44%
Don’t know or not applicable	8%	8%	6%

Question #3: What about equity financing for apartment acquisition or development? Considering both price and non-price terms, equity financing today is:
	July 2016	April 2016	July 2015
More available than three months ago	14%	12%	15%
Less available than three months ago	27%	23%	16%
About unchanged from three months ago	50%	53%	59%
Don’t know or not applicable	8%	13%	10%

Question #4: What about the conditions for multifamily mortgage borrowing? Considering both interest rates and non-rate terms, compared to three months ago:
	July 2016	April 2016	July 2015
Now is a better time to borrow	47%	19%	8%
Now is a worse time to borrow	22%	18%	38%
About unchanged from three months ago	27%	53%	45%
Don’t know or not applicable	4%	10%	8%

Question #5: Apartment property prices nationally have surpassed their previous peak, leading some to wonder if we're seeing the beginning of a new price "bubble". In the markets you're familiar with, do you think property prices are generally:
		Excluding Don’t Know
Undervalued - NOI growth should be clearly better than today's cap rates suggest.	0%	0%
Normal - fully justified based on current NOI and cap rates.	27%	27%
Frothy - investors will be adequately rewarded if recent NOI trends continue and cap rates don't back up.	53%	54%
Bubbly - investors are likely to be disappointed unless NOI increases are above average and cap rates compress further.	19%	19%
Don’t know / not applicable	1%	N/A

^{Note: The July 2016 Quarterly Survey of Apartment Market Conditions was conducted July 11-July 18, 2016; 120 CEOs and other senior executives of apartment-related firms nationwide responded. The April 2016 Quarterly Survey of Apartment Market Conditions was conducted April 4-April 11, 2016; 147 CEOs and other senior executives of apartment-related firms nationwide responded. The July 2015 Quarterly Survey of Apartment Market Conditions was conducted July 20-July 23, 2015; 154 CEOs and other senior executives of apartment-related firms nationwide responded.}

Mark Obrinsky mobrinsky@nmhc.org

Caitlin Sugrue Walter cwalter@nmhc.org

NMHC Quarterly Survey of Apartment Conditions (July 2016)

July 21, 2016

Staff Resource

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