Multifamily Financing and Sales Volume Indexes Reach Highest Levels Since 2022
There are encouraging indications that prospects for multifamily deals are looking up, according to the National Multifamily Housing Council's survey of market conditions.
Indexes of sales volumes, equity financing and debt financing all reached their highest levels since April 2022. However, the market tightness index slipped 10 points from 47 in July 2024 to 37 in October, suggesting looser market conditions for the ninth consecutive quarter, especially in the South and Sun Belt, which are experiencing a flood of new construction. Using a baseline of 50, an index above shows an improved outlook, a score below reflects a weaker one, and a score that's the same means conditions have not changed.
The improved outlook for multifamily debt and equity financing was helped by the Fed's 50 basis point interest rate cut in September. "Survey respondents, in turn, reported more favorable conditions for debt financing for the third straight quarter and more available equity financing for the first time in two and a half years," noted NMHC's chief economist Chris Bruen.
Sales volume perked up accordingly, raising the index from 57 in July to 67 in October.
Higher sales were reported by 43% of respondents – compared to 32% in July – though 46% saw no change.
The equity financing index jumped from 49 in July to 67 in October. In October 2023, it was only at 18. Though half of respondents perceived no change, 32% found equity more available.
A more optimistic outlook on debt financing that pushed the index up 14 points to 77 was also on display, with 62% of respondents viewing the current moment as a better time for multifamily mortgage borrowing, compared to just 37% who felt that way in July.
Which markets are benefiting from the increased sales activity? Some 38% of respondents thought primary markets like New York, Los Angeles and Miami were doing better than secondary or tertiary markets like Nashville, Austin and Boise, but 10% thought the opposite and 45% saw no change.
In housing markets, measures of market tightness include the probability of achieving a sale and house price appreciation. Tighter housing markets result in greater seller bargaining power and higher sale prices.
Source: GlobeSt/ALM