MultiFamily Market Outlook - 10/17/2006 (Plain Text Version)

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In this issue:
Apartments Have Positive Impact on Property Appreciation Rates
What Looks Like Rising Starts May Not Be, Really
Real Rents on an Modestly Upward Track
Gross Domestic Product and Job Creation Slowing
Multifamily Stocks Continue Record-Breaking Performance

Multifamily Stocks Continue Record-Breaking Performance

During the month of September, the MFSI increased by slightly more than 42 points—a shade more than one-and-a-quarter percent. With this rise, the MFSI is, yet again, at new all-time high, and is more than 30% higher than it was just 12 short months ago. During the past month, the value of the S&P 500 with dividends reinvested jumped by 2.58% and, as a result, it now finds itself almost 11% above where it was a year ago.

Because the S&P 500 with dividends reinvested rose by more than the MFSI during the month of August, the performance gap—or percentage difference—between the two indexes decreased from 178 June to 175 percent in September—three points lower than the all-time high of 178 percent set the previous month. Despite the very strong 76% rise in the S&P 500 since its most recent low (set in October 2002), the MFSI has risen a staggering 137% during the same 48-month time period. In addition, the MFSI continues to dramatically outperform the S&P 500 over longer time periods, including the past four, five and six years. Since December 1998, the MFSI has risen by a whopping 237% while the S&P 500 with dividends reinvested has gained a meager 22.7%.

1. For initial article discussing the MFSI in detail see NAHB Multifamily Market Outlook, January 2002.
2. Percent difference is defined as (MFSI minus S&P 500 with dividends)/S&P 500 with dividends.

During the month of September, the price-to-earnings ratio (P/E) of the MFSI rose slightly and now stands at 18.32 while the dividend yield, defined as the total cash dividend payments divided by the current stock price, and which moves in the opposite direction eased to 3.43%. The MFSI is an index of 24 publicly traded US headquartered firms, including 20 REITs, principally involved in multifamily ownership and management.