More Rental Market Uncertainty by Broderick Perkins
A second report, in as many days, about apartment market jitters says too many unsold condos could gum up the works my mid-year in what was considered a hot rental market. On January 18, RealFacts said the apartment market had been going great guns until landlords shot themselves in the foot by raising rents too quickly. RealFacts.com said renters' backlash, rather than seasonal factors, in the last quarter of 2006 produced unexpectedly high occupancy rate dips in every one of the nearly three dozen metros it tracks in 15 states. The next day a National Association of Homebuilders Washington Hotline newsletter carried the headline "New Multifamily Data Forecasts A Bumpier 2007." The apartment market got a boost last year from the high-priced housing market which forced shelter seekers into more affordable apartments and rental rates took off with the demand. In NAHB's preliminary forecast, due in full at the Multifamily Economic Forecast & State of the Industry session during the International Builders’ Show on Feb. 8, recounts how demand for rental apartments slowed even before RealFacts' fourth quarter report. Ron Witten, industry analyst, who briefed NAHB’s Multifamily Leadership Board, said demand for rental apartments slowed substantially in the third quarter of 2006, "in part, because a slowdown in job growth slowed the formation of new households." Witten blamed sluggish job growth, accompanied by falling mortgage rates, for contributing to the lower demand for rentals. He also said, some of the inventory of unsold condos is winding up in the rental pool, a comment that jibes with anecdotal evidence gathered from experts in some banking districts by the Federal Reserve's "Beige Book". Witten says demand for rental apartments will continue to outpace the supply, but only until mid-2007. Rather than falling rents, however, that just means landlords will have to put the brakes on the fast rise. Perhaps another previous peek at a slowing rental market was the National Multihousing Council's last survey, the "October 2006 Quarterly Survey of Apartment Market Conditions," released in early November, 2006. It's Market Tightness Index drifted down from 85 to 70, the lowest level in two years. Still, the council said, the index marked the 13th consecutive quarter in which the index was above 50. Fully 55 percent of respondents reported tighter market conditions, compared with 14 percent who reported looser conditions; almost one-third (31 percent) reported no change from second quarter’s strong market. Witten says the news isn't bad, just something to watch. Problematic condo sales are down from last June's annualized high of 943,000 units, but settled in at about the 750,000 in November, up from 741,000 in October. "While enthusiastic building has resulted in an 8 percent inventory of empty multifamily for-sale units -- a 15-year high -- it’s not a replay of the 1980s," Witten reported. | 
