Apartment Financing Conditions Are Mixed
The downturn in the housing market and tighter availability of credit are having a positive impact on multifamily rentals, according to the National Multi Housing Council's first-quarter survey of executives.
However, property sales are negatively impacted by the ongoing credit crunch.
The apartment industry trade group also reports that debt financing for apartment financing is more readily available, with an index measuring this rising from 17 in the prior quarter to 45 in the current quarter. Tightened underwriting standards and the "still-frozen" commercial mortgage-backed securities market have impacted debt financing availability.
However, those who thought that borrowing conditions worsened were down by half from 76% in the last survey.
Availability of equity financing is up slightly. However, index levels are at the second lowest levels on record, the NMHC reports.
An index that measures market tightness was below 50, indicating more slackness than tightness. The NMHC sees this as reflecting seasonal weakness (since there tends to be more leasing activity in the summer and fall). It could also reflect adjustments in the housing market.
"While the 'shadow' rental market (unsold houses and condos that have left the for-sale market to enter the rental market) may attract some apartment renters (and potential renters), thus far, the lowest homeownership rate in five and a half years seems to have increased demand for apartment residences," said Mark Obrinsky, chief economist at NMHC.
He observed that the apartment industry remains healthy thanks to strong fundamentals and also because there was not much overbuilding in the recent past.
About 80% of survey respondents indicated that tightening standards of mortgage lenders have resulted in fewer renters leaving multifamily properties for homeownership. This is up from the 75% that saw things this way in October. Over a third saw the decrease as "big," up from 18% last July. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/