The Market Tightness Index (31) came in well below the breakeven level of 50 this round, indicating lower rent growth and higher vacancies compared to July, while the Sales Volume Index (59), Equity Financing Index (57), and Debt Financing Index (78) signaled improved market conditions.
“A softening labor market combined with high levels of new apartment supply is resulting in slowing rent growth in many parts of the country,” noted NMHC’s Chief Economist, Chris Bruen. “This continues to be most pronounced in sunbelt markets, many of which are currently seeing falling rents.”
“We’ve seen a modest decline in long-term interest rates over the past three months—the 10-Year Treasury Yield is currently down 28 basis points (bps) from July—resulting in improved conditions for debt financing and an uptick in apartment deal flow.”
- The Market Tightness Index came in at 31 this quarter, indicating looser market conditions. Only 9% of respondents thought market conditions were tighter compared to three months ago, 47% of respondents thought conditions had become looser, while 43% reported unchanged market conditions relative to July.
- The Sales Volume Index reading of 59 reflects the third consecutive quarter of increasing deal flow. There was a greater share of respondents (30%) who reported an increase in sales volume compared to July than those who reported a decrease in sales volume (12%). Still, more than half of respondents (52%) thought sales volume was unchanged from July.
- The Equity Financing Index came in at 57 this quarter, meaning equity financing became more available over the past three months. A majority (60%) of respondents reported unchanged conditions for equity financing compared to July, 22% thought availability has increased, and only 8% thought equity financing became less available.
- The Debt Financing Index also came in above the breakeven level of 50—indicating more favorable conditions for debt financing compared to three months ago—with a reading of 78. More than half (59%) of respondents reported that now was a better time to borrow compared to three months ago, while only 3% reported less favorable borrowing conditions. Nearly a third of respondents, meanwhile, (30%) reported that debt financing conditions were unchanged from July.
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