Apartment Rental News Weekly Roundup: From the Desk of the NMHC

August 25th, 2009 by Matt DiChiara| Posted in Apartment Market Info | 2 Comments »

At the beginning of the month we discussed the NMHC’s Apartment Market Conditions survey for the second quarter of 2009, which used 4 indices to measure perceived changes on Vacancies, Sales Volume, Equity and Debt Financing.

Last week, we received a more detailed report from the NMHC, based on concrete numbers, which quantifies the apartment rental market’s Q2 performance according to Vacancy rates, Multifamily permits and starts, net absorptions, rents, transaction volume and mortgage debt.

Apartment Vacancy Rates

The Market Tightness Index (vacancy rate survey from earlier in the month) scored a 20 out of a possible 100, which indicates a continued trend of higher vacancies, but at a decelerated pace compared with Q1, which scored 16. The U.S. Census Bureau vacancy rate for all apartments rose to 12.2 percent, the highest in recorded history. The M/PF Research recorded 8.1 percent, the same as Q1 2009; geographically, vacancies rose in the South, remained steady in the West and declined in the Northeast and Midwest.

Apartment Rents

Unfortunately, information on national apartment rent changes differs according to source; M/PF Research reported that rents had declined a record-breaking 3.4 percent, not counting deflation (which softens the hit to 2.2 percent), whereas the CPI rent index, rose by 2.9 percent in that same second quarter. Once deflation is added, however, the CPI rent index rose by 4.1 percent, the highest in 55 years.

So how does an apartment marketing professional reconcile such disparate numbers? For one, the M/PF Research only includes investment grade apartments, which includes higher end apartments, which understandably suffered the most drastic rent drops. In the M/PF breakout above, it is evident that the most significant rent decreases by far are from the western part of the nation. Has anyone’s rents dropped by over 6 percent this year?

The CPI index includes all rental housing, counting rental homes, affordable housing and apartment building with fewer units in their index, but only in urban areas. Basically the disparate rent trends indicate, by the characteristics of their respective samples that renters are moving out of higher end apartments in suburbs and there is more competition for more affordable apartments in more urban areas.