The Trends: Fiscal Crisis Digs In

The ailing economy hasn’t damaged the apartment sector as badly as it has other commercial real estate sectors, thanks largely to debt capital available through Fannie Mae and Freddie Mac. But the multi-family industry is starting to feel the impact of the global fiscal turndown, according to the National Multi Housing Council’s October 2008 quarterly survey on apartment conditions.On a scale from zero—if all respondents answered in the negative—to 100—indicating that all respondents answered positively—the Market Tightness Index, which measures changes in occupancy rates and/or rents, fell from 40 in July to 24 in October. That forms the index’s worst showing since January 2002, when it produced a score of 4. The October 2008 installment marks the fifth consecutive quarter that the index has landed lower than 50.Each of the survey’s three remaining benchmark indices fell to record-low levels. The Sales Volume Index, which assesses changes in the number of deals, fell from 17 in July to just 5 in October, marking the 12th straight quarter the index has hit under 50. While 10 percent of respondents said the number of deals has not changed from July to October, no one surveyed reported more deals in October than in July, and 90 percent said the number of deals had decreased.The Equity Financing Index, a measurement of changes in availability, declined from 11 in July to 4 in October, and the Debt Financing Index, which measures changes in borrowing conditions, decreased from 13 in July to 4 in October. Both indices have experienced six consecutive quarters of under-50 scores.For each index, a score above 50 means that, on balance, conditions are getting better, a mark below 50 indicates that conditions are deteriorating and a showing of 50 signifies that conditions have remained the same. The October quarterly survey was conducted from Oct. 14 to Oct. 23 and received 70 responses, and the July survey, conducted from July 28 to Aug. 4, received 89 responses.