Zelman & Associates: Apartment Transactions Survey Shows Stronger Supply Index  

(Image courtesy of Zelman & Associates; Breakout image courtesy of Joseph Frimpong/pexels.com)

Zelman & Associates, a Walker & Dunlop company, New York, released its latest apartment transactions survey, finding that the supply-demand spread moderated in June after some imbalance in the first three months of the year.

The seller supply index rose each month through the first half of the year; it’s up 1.1 points year-over-year to 39. On a quarterly basis, the supply index was up 7 points.

However, the buyer demand index recorded a slight sequential decrease, down 1.1 points to 46.6 in June. It’s still up 4.9 points year-over-year, though–the largest level of growth since February 2022.

On a quarterly basis, the demand index was up 1.6 points. Zelman & Associates anticipates June’s slight decrease is a temporary situation.

Buyer demand for Class B products is growing, with a 2.8-point sequential increase on average in the month, compared with Class A’s 1.9-point increase. However, Class A assets are still preferred overall.

The past few years have seen the acquisition financing availability index negatively correlated to the 10-year Treasury year–a trend that held in June. With a 16-basis point slide in the 10-year Treasury yield, acquisition financing improved 1.8 points sequentially to 40 .

The underwriting assumptions index showed a slight uptick in optimism, with a 0.4-point increase sequentially.

Cap rates were fairly flat in the quarter. Survey respondents also reported more availability of development financing in June.

In the second quarter, the highest ever share of contacts surveyed–about three quarters–answered that buying is the best decision in the current environment, compared with selling or building.

The share of respondents who believe there will be a meaningful increased in distressed sales was up from 7.7% to 9.3%. However, sixty-three percent believe there will be a somewhat limited number of forced distress transactions.

The survey covers roughly 1.5 million institutional-quality units and developers that account for approximately 10% of multifamily starts.