NAHB Sees Rising Demand for Apartments

Washington, DC, Sept. 15, 2010--The National Association of Home Builders said that current and expected demand for rental apartments improved significantly in the second quarter compared to the first quarter.

Its current indexes for Class A, Class B and Class C apartments rose to 59.5, 57.6 and 56.6, respectively, increases of more than 15 points when compared to the first quarter and the highest level since 2007. Builders' expectations for demand in the next six months increased to similar levels.

The Multi-family Market Index measures multifamily builder sentiment based on production and occupancy at the current time, as well as builders' expectations for conditions over the next six months.

An index number greater than 50 indicates that the number of builders who view conditions as getting stronger outnumber those who view conditions as becoming weaker.

"Lenders have been unwilling to fund multifamily development, because the inventory of rental housing expanded from traditional multifamily communities to foreclosed and investor-owned single-family homes made available for rent as a means of creating a temporary cash flow until the homes can be sold," said David Crowe, NAHB's chief economist.

"As the supply of additional units declines and pent-up household formations re-emerge when the labor markets improve, demand for traditional rental apartments will rise. It is possible that the supply of new units will not arrive in time to meet the emerging demand and some shortages will occur in some markets. Even in robust production years, it is only possible to increase the stock of rental units by a relatively small percentage through new construction."