WASHINGTON — The deepening recession and ongoing credit crunch continue to drag down builder confidence in the multifamily housing market, according to the latest results of the Multifamily Rental Market Index (MRMI) and Multifamily Condo Market Index (MCMI), released today by the National Association of Home Builders (NAHB).
“Job losses and tightening credit continue to depress current and future multifamily construction,” said David Crowe, NAHB’s chief economist. “Without job growth as a demand driver for rental apartments, new construction is declining. And without access to credit, the pipeline for future construction is running dry.”
The component of the MRMI that gauges supply conditions sank dramatically in the fourth quarter of 2008, down to 22.4 for affordable apartments and 18.6 for market rate apartments, compared to 45.3 and 40.00, respectively, from the same time a year ago. On the condo side, the supply component fell 11 points from the fourth quarter of 2007, to hit a new record low of 7.8.
Looking ahead six months, builders and developers are only slightly less pessimistic: The MRMI component tracking builder expectations for the supply of affordable rentals stood at 28.6, down from 48.9 in the fourth quarter of 2007. Market-rate rentals, at 22.5, were less than half the level of 50 at the same time a year ago. On the MCMI, the index gauging expectations for condo supply stood at 13, down from 29.2 in the fourth quarter of 2007.
On the demand side, the components of the MRMI tracking current conditions for every class of rental apartments — affordable, moderately priced and luxury market-rate — also fell below 50 during the fourth quarter of 2008. For Class A apartments, the index value declined to 23.5, down 19.9 points from the same period the year before. The index value tracking demand for moderately priced and affordable apartments fared only slightly better, slipping 11.6 points and 15.9 points respectively to 37.1 and 42.4. Other indicators also remain weak: traffic among potential renters and condo buyers is down, vacancy rates for apartments is higher than at the same time a year ago, and asking rents are in decline. For the fourth quarter of 2008, the index value for asking rents stood at 41, the lowest level recorded since the inception of the series in 2003.
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