Washington, DC, September 12, 2006--The stocks of publicly traded companies whose primary business is multifamily housing outpaced the market as a whole in August, pushing the National Association of Home Builders’ (NAHB) Multifamily Stock Index (MFSI) to its highest reading of all time.
“I think the confidence in the market reflects the strong fundamentals for the rental side of the multifamily industry right now,” said Leonard Wood, director of Wood Partners, LLC and chairman of NAHB’s Multifamily Leadership Board. “In many markets across the country, the supply of new rental units has not kept up with demand and that is pushing up occupancy rates, rents and profits.”
NAHB’s Multifamily Stock Index tracks the total returns (including capital gains and dividends) of 24 publicly traded firms principally involved in the ownership and management of apartments. During the month of August, the MFSI reached 3,328, its highest reading of all time, and almost 30 percent higher than it was a year ago. In comparison, the S&P 500 index with dividends reinvested gained 2.40 percent in August and is about 9 percent higher now than it was a year ago.
This latest increase in the MFSI widened the performance gap--percentage difference--dramatically between the two indexes, with the MFSI outperforming the S&P 500 with dividends by 178 percent. This percentage difference comes despite a very strong rebound--72 percent--by the S&P 500, since that index dipped to its lowest level in late 2002. During the same 46-month period, the MFSI has risen 134 percent.
In addition, the MFSI continues to dramatically outperform the S&P 500 over even longer time periods. Since December 1998, the MFSI has risen by 232 percent while the S&P 500 with dividends reinvested has gained 19.6 percent.
“Many of these companies were able to take advantage of the condo boom over the last several years, and now that the for-sale market is cooling, they can expect a strong performance from their rental apartment operations,” said Elliot Eisenberg, Ph.D., a housing policy economist at NAHB and creator of the MFSI. “In addition, the Real Estate Investment Trusts, or REITs, which make up the majority of the companies tracked by the index, are well-capitalized and have increasingly strong bottom lines.”
NAHB created the Multifamily Stock Index in 2002 as a way to more easily track the performance of public firms involved in multifamily housing. To allow for historical comparisons to be made between the MFSI and other financial indices, the starting point for tracking performance data for these publicly traded firms was set at Dec. 31, 1998. The MSFI appears monthly in NAHB’s electronic newsletter Multifamily Market Outlook. More information about the index is available at www.nahb.org/multifamily.
