The National Multihousing Council’s (NMHC) latest apartment investment survey out today has market tightness falling to 52 from 68 last quarter. With 50 representing the better vs. worse divide, results show respondents are feeling the bite of new supply plus a bit of seasonal slowdown as well I sense:
The latest ULI/EY (Urban Land Institute/Ernst & Young) Commercial and Apartment forecast shows that respondents expect price growth to slow during the next three years but they expect better growth than when queried in April this year:
Back in Q2 the economists and real estate pros thought prices would appreciate 7% this year and 5.7% in both 2015 and 2016. Now they expect 10% growth this year and 5.7% next year falling to 5% the year after. These kinds of surveys and charts usually set off all kinds of behavioral economics warning bells in my head but I’ll let you be the judge… The web piece is here, the full report here.
That said, this chart probably is the clearest depiction of how the statistician drowned in water that averaged only three feet deep. What happened to those deals underwritten with the average growth number when 2008 and 2009 came along? To avoid this fate I highly recommend reading Sam Savage’s The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty (http://amzn.to/PKIaOc on Amazon)
Update 2:51pm Wednesday Oct. 15- updated to reflect that the 10yr apartment loan rate was lowered on Oct 1st but the spread was higher.
Well apartment building investors, things just keep getting interestinger and interestinger as a friend used to say. Just last month I was asking if 4.5% was the lower limit on the 10 year loan we track and sure enough a few weeks later it plunged through that to come in at 4.139 Monday after a brief stop at 4.365 last week. Note that both the 10yr Treasury (or T10, which drives these types of rates) and the spread between the T10 and the apartment rate fell with the spread dipping below 2%, coming this week at 1.929%: