Apartment market recovery continues improvement

The apartment market experienced improved conditions.

The multifamily market continued to post strong figures during the third quarter, which may mean recovery strengthened for commercial property managers.

Improvement in the National Association of Home Builders' Multifamily Production Index occurred for the third quarter in a row, as the figure was 52. This was two points lower than the second quarter, but because the figure was higher than the threshold of 50, positive conditions were present.

Developer sentiment of the market was at a level of 69 during the quarter, which was the fifth quarter where the figure was higher than 60, the report explained. The last time a streak of this length occurred was in 2003.

Units for sale rose to 44, which was the highest level since 2005, according to the report. The level for low-rent units was at 46, which was 15 points lower than the previous quarter's figure.

"The multifamily market has recovered substantially since the end of 2010, and now stands at about 70 percent of the way back to a sustainable level," said David Crowe, chief economist for the NAHB. "Our baseline forecast calls for further steady growth in the rate of multifamily production. However, there are reasons for concern, especially at the affordable end of the rental apartment market, where builder confidence dropped dramatically in the third quarter. That was likely due to a specific provision of the Low-Income Housing Tax Credit set to expire at the end of the year."

The report added that the Multifamily Vacancy Index fell to 33, noting that vacancies continued to decline during the third quarter. This was significantly lower than the cyclical peak of 70, recorded three years ago. This continued steady declines that began in 2010 and low figures were posted throughout this year and last year.

Vacancy declines may continue through next year
The level of vacancies in the multifamily market may continue to drop in the next 12 months, according to a report from the National Association of Realtors.

The multifamily market should see a drop in vacancies of 0.1 percentage point in the next year. While the figure is low, the report explained that this sector already has a low level of vacancy and rental price improvements were elevated in recent months.

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