MultiFamily Market Outlook - 04/28/2008 (Plain Text Version)

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In this issue:
Breathe Easier: Dense Multifamily Development Means Lower Vehicle CO2 Emissions
Starts are Down — Way Down
Real Rents Drop Slightly
Forecast: Mild Recession, with Improvement in 2009
MFSI Swings Upward

MFSI Swings Upward

During the month of March, the MFSI rose by slightly more than 183 points, its largest monthly increase in five months. Including this most recent increase, the MFSI is up by just over 11.5% over the past three months. The February gain of more than 6.5% continus a see-saw pattern where the MFSI moves up one month and then down the next and is unable to put together back-to-back monthly increases. With the most recent rise, the MFSI has risen in six of the past 12 months, and the MFSI is in positive territory year-to-date for the third month in a row for just the first time in more than one year. With the latest rise, the MFSI finds itself 897 points, or about 23%, off its all-time high reached in January 2007.

During the past month, the value of the S&P 500 with dividends reinvested fell by slightly less that half-of-one-percent and now finds itself down a bit more than 5% over the past 12 months, the first time it has been in negative territory for three straight months year-over-year in almost five years. Because the S&P 500 with dividends decreased by about half-of-one percent while the MFSI increased by more than 6% during the month of March, the performance gap--or percentage difference--between the two indexes increased from 121% last month to 136% in March--up sharply from the recent low of 92% set three months ago. Despite the very strong 80% rise in the S&P 500 since its recent cyclical low set in October 2002, the MFSI has risen by a substantially stronger 107% during the same 65-month time period.

In addition, the MFSI continues to dramatically outperform the S&P 500 over longer time periods including the past five, six and seven years. Since December 1998, the MFSI has risen by a whopping 195 % while the S&P 500 with dividends reinvested has gained a much smaller 25%. During the month of February the price-to-earnings ratio (P/E) of the MFSI rose and now stands at 15.39 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 6.45%. The MFSI is an index of 19 publicly traded US headquartered firms, including 16 REITs, principally involved in multifamily ownership and management.