Builder confidence in the 55+ housing market was markedly more upbeat in the first quarter of 2011 for apartment production and demand than for sales of single-family or condominium homes, according new data from the 55+ Housing Market Index (HMI), a quarterly NAHB report that tracks builder sentiment in the 55+ housing segment.
The relative strength in the 55+ multifamily rental market is consistent with other indicators that suggest pent-up housing demand will be first unlocked in rental markets, pushing rental vacancies rates down and rents up. The relative weakness on the owner-occupied side of the 55+ HMI reflects ongoing weakness in housing, particularly for 55+ buyers who in most cases must sell their existing home before purchasing a new residence.
The expected demand index for 55+ multifamily rental units rose 10 points, to 44, from a year earlier. A number greater than 50 indicates that more builders view conditions as good than poor. The indices of current and expected production of 55+ apartments gained 7 and 8 points, up to 20 and 27, respectively, in the first quarter of 2011. The index measuring current demand jumped 11 points, up to 39.
In contrast, the 55+ Housing Market Indices for single-family units and condos declined 2 and 3 points on a year-over-year basis, down to 17 and 8, respectively. It is worth noting the survey measures are not seasonally adjusted, so year-over-year comparisons are more appropriate than comparing quarters.
The 55+ single-family HMI measures builder sentiment based on current sales, prospective buyer traffic and anticipated six-month sales for that market. Among the index components, present sales dropped two points, to 15. Expected sales (six months into the future) dropped six points, to 24. And traffic of prospective buyers fell one point, to 17.
The 55+ multifamily condo HMI also showed weakness, with an index level of 8, down from 11 at the beginning of 2010. All three index components – current sales, expected sales and buyer traffic – declined during this period.