July apartment market conditions show improvement; construction labor reported as both more expensive and harder to find


Apartment market conditions improved across three of the four indexes measured by the July National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The Sales Volume (55), Equity Financing (56) and Debt Financing Indexes (55) all increased to above the breakeven level of 50, while the Market Tightness Index came in at 46.

“The apartment industry is showing small, but unmistakable signs of improvement,” said NMHC Chief Economist Mark Obrinsky, “The Market Tightness Index continues to show some weakening. However, the number of respondents who reported looser conditions fell to 29 percent, the lowest share since January of 2016.”

“Of greater concern is that the demand for construction labor has been growing faster than supply, driving up costs and delaying some projects. In fact, the majority of firms reported that the availability of construction labor has declined over the past year, even accounting for increased compensation,” said Obrinsky.

Overall, just one in five firms (18 percent) indicated that construction labor was as available as this time last year. Over half (54 percent) responded that labor was less available, even at higher compensation levels. Another (28 percent) said that labor was as available as 12 months ago at higher compensation levels [numbers exclude 11 percent who reported don’t know/NA].

At 46, the Market Tightness Index was the only index to remain below 50, marking the eleventh consecutive quarter of overall declining conditions. One-fifth of respondents reported tighter market conditions than three months prior, compared to 29 percent who reported looser conditions. Half of respondents felt that conditions were no different from last quarter.

The Sales Volume Index rose to 55, the first time the index has indicated breakeven or improving conditions since July 2016. Slightly less than half of respondents (42 percent) reported unchanged sales volume from three months earlier, while almost one-third (32 percent) noted higher volume. Fewer than one-quarter (22 percent) reported lower sales volume.

The Equity Financing Index increased from 54 to 56, indicating overall improving conditions for the third straight quarter. While most respondents (55 percent) reported unchanged conditions in the equity market, almost one-quarter (23 percent) indicated that equity financing was more available than in the three months prior. Just 11 percent of respondents believed equity financing was less available.

The Debt Financing Index rose from 36 to 55, with over one-quarter of respondents (27 percent) reporting improving conditions for debt financing compared to three months prior. Seventeen percent of respondents disagreed, believing that conditions for debt financing had become less favorable. Just under one-half (49 percent) of respondents reported unchanged conditions.

About the Survey

The July 2018 Quarterly Survey of Apartment Market Conditions was July 9-18, 2018; 98 CEOs and other senior executives of apartment-related firms nationwide responded.

View the full data online.

About NMHC

Based in Washington, D.C., the National Multifamily Housing Council (NMHC) is the leadership of the trillion-dollar apartment industry. We bring together the prominent apartment owners, managers and developers who help create thriving communities by providing apartment homes for 39 million Americans. NMHC provides a forum for insight, advocacy and action that enables both members and the communities they help build to thrive.