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Survey Reveals Apartment Sector Going Strong

08/11/2011 | By Carisa Chappell

Survey Reveals Apartment Sector Going Strong
With property sales increasing and vacancies decreasing, the apartment sector is continuing its rally towards a full recovery, according to a report from the National Multi Housing Council (NMHC).

In a quarterly survey of the apartment market, released Aug. 4, the NMHC data suggested that the sector is experiencing improvements across a number of factors. The survey is designed to measure apartment real estate market health as reflected by vacancy rates, property sales, equity financing and borrowing.

In an interview with REIT.com, Mark Obrinsky, NMHC's chief economist, said the apartment sector is benefiting from growing demand for space, even as the overall economy remains hampered by the housing bubble. The NMHC's "Market Tightness Index," which looks at vacancies and rents, indicated improving conditions for the sixth consecutive quarter.

"Several things are going on at the same time," Obrinsky said. "There's a continuing shift in preferences from homeownership to renting. Every time homeownership rates drop a percentage point, we are getting more than 1.1 million new renters."

In addition, the availability of debt financing for acquisitions continues to broaden, according to the survey. Obrinsky said more than half of the respondents indicated that borrowing conditions had improved compared to the prior three months.

Obrinksy said demographic trends will continue to bring new renters to the apartment market. With the United States' population growth, Obrinsky said he expects improvements to continue throughout the remainder of the year and into 2012.

"We are also still seeing this continuing stream of echo boomers or the millennial generation," Obrinsky said. "There are a lot of young people moving into the housing market for the first time, and as with previous generations, they are more likely to rent rather than own."

However, challenges do remain for the sector, according to Obrinsky. Keeping up with the demand for apartment space may pose problems for the sector down the road, he said. He added that the sector's biggest challenge right now is ensuring that there are enough apartment units to meet the existing demand.

"New construction starts fell to an all-time low last year, and the completion of new apartment buildings will almost surely be at an all-time low this year," Obrinsky said.