MultiFamily Market Outlook - 09/26/2008 (Plain Text Version)

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In this issue:
Decline in Multifamily Construction Means Fewer U.S. Jobs
Multifamily Starts Still in Recovery
U.S Economy Loses Momentum, Financial Markets Still Volatile
MFSI Peformace is Steady
Rents Showing Signs of Normalcy

MFSI Peformace is Steady

During the month of August the MFSI fell by 53 points, thus continuing to trade in a narrow band between 2,700 and 3,200. With this mild decrease, the MFSI is up by slightly more than 14.5% year-to-date. The August fall of slightly less than 2%—following the largest one-month rise of all time in July—suggests that the MFSI may be permanently distancing itself from its poor performance of 2007, but it may also be unable to test any of its historic highs.

With this most recent decline, the MFSI has declined in five of the past 10 months, but is in positive territory year-to-date for the eighth month in a row. With the latest decrease, the MFSI finds itself 812 points, or about 21%, off its all-time high reached in January 2007. During the past month, the value of the S&P 500 with dividends reinvested increased by slightly less than 1.5% and now finds itself down a bit more than 11% over the past 12 months, the first time it has been in negative territory for eight straight months year-over-year in about five years.

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

Because the S&P 500 with dividends increased while the MFSI declined during the month of August, the performance gap—or percentage difference—between the two indexes decreased from 156% last month to 148%. Despite the very strong 76% rise in the S&P 500 since its cyclical low set in October 2002, the MFSI has risen by a substantially stronger 113% during the same 71-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 204% while the S&P 500 with dividends reinvested has gained a much smaller 22%. During the month of August the price-to-earnings ratio of the MFSI decreased and now stands at 11.26 while the dividend yield, defined as the total cash dividend payments divided by the current stock price, and which moves in the opposite direction, rose to 6%. The MFSI is an index of 19 publicly traded US headquartered firms, including 16 REITs, principally involved in multifamily ownership and management.