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Fannie to Rent to Owners in Foreclosure
Industry News
Philadelphia Apartment Market Struggling
Denver Apartment Vacancies Drops to 7.4 Percent in Q3 2009
Student Housing Decided by Lottery in Texas
Post Properties Doubles Profits in Q3 2009
Reno-Sparks Apartment Vacancies Stabilize in Q3 2009
Home Properties Inc. Reports Operating Results
U.S. Commercial Property Index Shows Higher Prices and Transaction Volume
More Empty Apartments, Lower Rents Predicted in Columbus
Albuquerque Apartment Market Bucks National Trends in Spite of Economy
Housing Price Plunge Makes U.S. Homeownership Perilous Path
Legislative/Legal News
Sterlings Will Pay $2.7 Million to Settle Rental Bias Suit
Congress Expands Homebuyer Tax Credit
Houston Apartments Face Stricter Inspections
New Orleans Apartment Owners Call Recent Standoff Rare
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Fannie to Rent to Owners in Foreclosure
Digested From "Fannie to Rent to Owners in Foreclosure"
Wall Street Journal (11/06/09) by Nick Timiraos
As part of the federal government's latest effort to assist troubled borrowers, Fannie Mae has agreed to allow homeowners facing foreclosure to remain in their houses and rent them for up to a year. At the same time, the move keeps more foreclosed residences from flooding the market. Dubbed the "Deed for Lease" Program, the initiative lets borrowers who do not qualify for loan modifications transfer their property to Fannie Mae in return for a lease. Borrowers-turned-tenants will then be required to pay market rents, which are often lower than the cost of monthly mortgage payments. To qualify, borrowers must demonstrate they cannot afford their current mortgage, but can indeed pay market rent. Furthermore, the borrower's mortgage servicer has to show the borrower did not meet the criteria for a loan modification. Fannie Mae has yet to officially estimate how many homeowners will take advantage of this program. During this year's first and second quarters, the government-sponsored enterprise acquired approximately 57,000 homes via foreclosure. Jay Ryan, vice president of equity investments at Fannie Mae, concludes, "If you keep more people in their homes, it's better for the community. It's better for the financial institutions that own those homes. Hopefully, less foreclosure product on the market will help stabilize those communities."
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Industry News
Philadelphia Apartment Market Struggling
Digested From "Multifamily Market Also Struggling"
Philadelphia Inquirer (11/08/09) by Alan J. Heavens
Rising joblessness continues to be the main cause of apartment vacancies throughout the Philadelphia metro area. Delta Associates reports that the metro Philadelphia apartment-vacancy rate was 6.2 percent at the end of September versus 4.1 percent a year earlier. Delta's latest research shows that approximately 3,400 more rental units are to be completed in the next 36 months, which may help boost the overall vacancy rate. Exacerbating the situation in and around the city are high building costs, reports Building Industry Association of Philadelphia President Sam Sherman. He comments, "The cost to build new construction is out of sync with the buyer's ability to afford it. For that reason, the private market fails to provide middle-class housing, and we have a bifurcated market that provides housing for the poor and the wealthy." The city's landscape remains littered with signs for projects that never got off the ground. Others were begun and ended up in either foreclosure or a sheriff's sale.
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Denver Apartment Vacancies Drops to 7.4 Percent in Q3 2009
Digested From "Denver Apartment Vacancies Drops to 7.4 Percent in Third Quarter"
Denver Post (CO) (11/05/09)
According to a new survey by the Apartment Association of Metro Denver and the Department of Local Affairs Division of Housing, the Denver metro area's apartment vacancy rate fell to 7.4 percent during this year's July-through-September period. This marks the first such decrease in 21 months. Area apartment vacancy rates are now at their lowest level since 2008's third quarter when they were 6.5 percent. Researchers note that a drop in the unemployment rate coupled with continued population increases are among the biggest contributors to the declining vacancy rate. Lauren Brockman of Orion Real Estate Services Inc. states, "We're still not seeing a stop in rent deflation. The consumer is still being very tough on us from a standpoint of passing on any rent increase whatsoever."
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Student Housing Decided by Lottery in Texas
Digested From "Lottery Holds Fate for Students' On-Campus Living"
University Star (11/05/09) by Kosaku Narioka
At Texas State University, the Department of Housing and Residential Life has unveiled a housing policy that will require students under the age of 20 with fewer than 30 credit hours to live on-campus. The students who graduated from high school within a year will be required to live on campus regardless of their credit hours. This policy will take effect next fall. The adjustment came in response to growing freshmen enrollment coupled with delayed housing construction projects. Joanne Smith, vice president of Student Affairs, said the university staff is planning to conduct a lottery early spring for them as freshmen enrollment is expected to continue growing. Smith continues to give regular quarterly updates on what is happening on-campus to members of the Austin Apartment Association, in addition to owners and managers of San Marcos-based apartment communities. Her goal has been to ensure communication between the university and area housing interests. To this end, Texas State is in the process of developing an Achieving Community Together Ally program in which local apartment communities may earn recognition as an ACT Ally if they meet the expectations the college outlines.
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Post Properties Doubles Profits in Q3 2009
Digested From "Post Properties Doubles Profits"
Atlanta Journal-Constitution (11/04/09) by Michelle E. Shaw
Post Properties Inc. doubled its profits in this year's July-through-September period, as quarterly net income rose to $50.2 million from $25.1 million a year earlier. Company officials cited infusions of cash from property sales and a debt buy-down as the main reasons for the year-to-year improvement. Post Properties CEO Dave Stockert reports that activity in the third quarter was "consistent with expectations." The Atlanta-based REIT ranks as one of the nation's biggest developers apartment communities. It made approximately $54.6 million on the sale of two apartment communities in July and another $68 million or so near the end of September by selling more than 4 million common shares of common stock. Funds from operations, meanwhile, dipped to $13.9 million from $16 million in 2008's third quarter.
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Reno-Sparks Apartment Vacancies Stabilize in Q3 2009
Digested From "Reno-Sparks Apartment Vacancies Stabilize in Third Quarter"
Reno Gazette-Journal (11/04/09) by Bill O'Driscoll
CB Richard Ellis (CBRE) reports that apartment vacancy rates in Nevada's Reno-Sparks market fell markedly in this year's fiscal third quarter, the first such decrease since the summer of 2008. Leonard Ramos, senior vice president at CBRE's Reno office, wrote: "It would appear that apartment fundamentals are beginning to show signs of approaching stabilization. Finally, there is light at the end of the tunnel." The study showed an overall vacancy rate in Reno/Sparks-area apartments of 9.08 percent in October, a decrease from 10.93 percent for the three-month period ending in July. At the same time, monthly rents improved for the same period from $844 to $857. CBRE researchers report that the key driver was the market for larger two- and three-bedroom units and townhouses. Ramos states: "What we surmise is that the shadow market is having less of a negative impact on markets than recently. For Washoe County, the overall month-to-month foreclosure-related activity dropped by more than 20 percent in September." He adds that multifamily housing transactions across the region have been stagnant since the first of the year, with only one known sale of an apartment community in the category of 80 units or more.
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Home Properties Inc. Reports Operating Results
Digested From "Home Properties Inc. Reports Operating Results"
GuruFocus.com (11/06/09)
Home Properties reports that it had an unsecured line of credit agreement with M&T Bank of $175 million, which is due to expire at the end of August 2011. The company's line of credit agreement provides the ability to issue up to $20 million in letters of credit. The REIT, which has operations in select Northeast Midwest Mid-Atlantic and Southeast Florida markets, specializes in owning and managing apartment communities. Home Properties has a proven track record of creating and preserving value in multifamily housing. As of the end of the third quarter, the company had outstanding letters of credit of $7.5 million. Cash used in investing activities totaled $45 million for the nine months ended Sept. 30. Meanwhile, cash used in financing activities totaled $68 million for the same period versus $76 million a year earlier. The $8 million difference is mainly due to $65 million less cash provided by the line of credit this year as compared to 2008, partially offset by $51 million less cash used for stock buybacks and $34 million higher net mortgage proceeds year over year.
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U.S. Commercial Property Index Shows Higher Prices and Transaction Volume
Digested From "U.S. Commercial Property Up in 3rd Quarter -- Index"
Reuters (11/03/09) by Ilaina Jonas
According to the MIT Center for Real Estate's transaction-based index (TBI), prices for investment-grade commercial real estate increased 4.4 percent in this year's third quarter, potentially heralding an end to the sector's year-long downward spiral. The index tracks the prices that institutional investors pay or receive when buying or selling such commercial properties as apartment communities, office buildings, and shopping centers. The improvement is not only the first positive price change in the index in over a year, it is the biggest gain since the market downturn started in the summer of 2007. David Geltner, director of research at MIT/CRE, cautions, "One quarter does not a trend make, and we are still well below normal trading volume. Nevertheless, this is the strongest sign of a bottom that we've had in two years." Additionally, transaction volume climbed to 90 in the 2009 third quarter from 42 during the previous three months. "The big news this quarter is not just that the price index increased, but that transaction volume substantially increased for the second quarter in a row, reflecting the first increase in market sentiment in two years," Geltner said.
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More Empty Apartments, Lower Rents Predicted in Columbus
Digested From "More Empty Apartments, Lower Rents Predicted"
Columbus Dispatch (OH) (11/02/09)
Marcus & Millichap reports that the Columbus metro area's apartment-vacancy rate is expected to increase and rents are expected to decline for the remainder of 2009 as the downturn continues. Regardless, the local apartment sector has held up well. Michael Glass, regional manager of the Columbus office of Marcus & Millichap, states, "The resilience of the Columbus apartment market during the recession may be overlooked by investors. The low cost of properties enables investors to build portfolios quickly." The firm's study further shows that approximately 1,000 apartment units will become available this year. In 2008, developers added only 204 total units. The new supply coupled with soft demand will increase vacancy rates by about three-quarters of a percentage point to 8.9 percent. Likewise, monthly asking rents are expected to fall 1.9 percent for the year to $664. Finally, effective rents are on pace to decline 3 percent to $615 a month.
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Albuquerque Apartment Market Bucks National Trends in Spite of Economy
Digested From "Averting Adversity: Metro Apartment Market Bucks National Trends in Spite of Economy"
Albuquerque Journal (11/02/09) by Richard Metcalf
Despite rising unemployment and a shrinking job sector, the Albuquerque metro area's apartment sector has held up well this year. John Rials, managing partner at Greystar Real Estate Partners, reports that an occupancy rate around 93 percent coupled with stable monthly rents are signs of a local economy that "may not be robust, but it hasn't been horrible." By contrast, the Eagle Multi-Housing Team at CB Richard Ellis' Albuquerque office reports that Santa Fe's vacancy rate was 87.8 percent as of the end of September. Rents, meanwhile, were down a little over 15 percent from a year earlier. Apartment broker David Eagle remarks, "It has suffered somewhat the same fate as Phoenix and Las Vegas in occupancy and rents." Rials and Eagle were a couple of the panelists at the recent Apartment Association of New Mexico's Fourth Annual Apartment Industry Economic Forum. The main topic of discussion at this year's event was the delayed impact of the recession on apartments nationwide. Eagle declared, "Almost the entire national apartment industry fell off a cliff at the beginning of the year." In the Albuquerque metro area, job losses were slightly higher than the statewide average at 3.8 percent at the end of the third quarter. So far, this trend has yet to really play out in the apartment market. In fact, Albuquerque was one of only seven of the 33 metro areas tracked by RealFacts with a year-over-year increase in rents. The resiliency of Albuquerque's apartment market was attributed during the forum to reasons typically used to support the belief that the recession's impact is not as bad locally as elsewhere. For one, one out of every five jobs in and around the city is a direct government job. At the same time, continued demand for trained health care workers is bolstering local employment while the University of New Mexico, Kirtland Air Force Base and Sandia National Laboratories are further helping to stabilize.
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Housing Price Plunge Makes U.S. Homeownership Perilous Path
Digested From "Real Estate Price Plunge Makes U.S. Homeownership Perilous Path"
Bloomberg (11/03/09) by Kathleen M. Howley
Americans are becoming disillusioned about the idea of homeownership being a path to wealth, considering that real estate trade groups show house prices shifting from a 12 percent increase in 2005 to a 13 percent decrease this year. Harvard University's Joint Center for Housing Studies Director Nicholas Retsinas says, "We always talk about homeownership as being the American dream, but during the last decade people forgot it's shelter and started thinking of it as a fast way to make or lose money. The quicker we move back to seeing real estate as a place to live, a place to put down roots, the quicker the housing recovery will strengthen." AllianceBernstein LP global economic research head Joe Carson says recovery will not occur until people no longer look at houses as commodities, no matter the amount of stimulus funds put toward housing by the federal government. "Buying the house was a mistake," says first-time owner Kajal Dharod, who purchased a four-bedroom house in Rancho Cucamonga, Calif., in 2006 for $559,000 that is now worth $360,000 and carries a monthly mortgage payment of $4,200. "We should have rented an apartment rather than doing what we thought was the right thing and putting everything we had into the house," he says.
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Legislative/Legal News
Sterlings Will Pay $2.7 Million to Settle Rental Bias Suit
Digested From "Sterlings Will Pay $2.7 Million to Settle Rental Bias Suit"
Los Angeles Times (11/04/09) by Scott Glover
Real estate mogul and Los Angeles Clippers owner Donald T. Sterling and his wife, Rochelle, last week agreed to a more than $2.7-million settlement regarding allegations that they discriminated against Latinos, African Americans, and families with children at numerous apartment communities they own in the Los Angeles metro area. The settlement, which must be approved by U.S. District Judge Dale S. Fischer, is the biggest ever obtained by the Justice Department in a housing discrimination case involving rental apartments. Under terms of the agreement, the Sterlings' insurers would be required to pay $2.625 million to a fund for people who were allegedly harmed by their discriminatory practices. In addition, the proposed agreement requires a $100,000 penalty to be paid to the federal government. Thomas E. Perez, head of the Justice Department's Civil Rights Division, states, "With tight mortgage credit and rising foreclosures, it is more important than ever that minorities not face discrimination when renting apartments." Bob Platt, the Sterlings' longtime lawyer, said the couple opted to settle in order to avoid what they believed would be the far more costly expense of continued litigation. In a statement, Platt said: "My clients vehemently and unequivocally deny that anyone was discriminated against." Through their family trust and Beverly Hills Properties, the Sterlings own and operate around 120 L.A. County apartment communities containing approximately 5,000 rental units.
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Congress Expands Homebuyer Tax Credit
Digested From "Congress Expands Homebuyer Tax Credit"
Baltimore Sun (11/06/09)
The U.S. House voted on Nov. 5 to extend and expand a tax credit for homebuyers past its Nov. 30 expiration date, giving Realtors hope that house sales will climb during the normally slow winter months. Buyers who have owned their current homes for at least five years would qualify for tax credits of up to $6,500, while first-time buyers or people who have not owned in the previous three years could receive up to $8,000. Buyers must sign purchase contracts prior to May 1 and close before July 1. The incentive is being made available for the purchase of principal residences priced at $800,000 or less, and the break would be phased out for individuals earning more than $125,000 a year and for joint filers with annual incomes above $225,000.
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Houston Apartments Face Stricter Inspections
Digested From "Fighting Blight"
Houston Chronicle (11/04/09) by Carolyn Feibel
In the Houston market, nearly 4,000 apartment communities now face more aggressive inspections following the City Council's recent approval of an ordinance aimed at eliminating dangerous conditions throughout the local multifamily housing sector. City officials say the goal is for blighted, dangerous conditions to disappear as about 350,000 rental apartments become subject to rolling inspections on a four-year cycle. State Rep. Dwayne Bohac (R-Houston), who authored the state law last spring that required Houston to implement such a program, remarks, "This is kind of a basic human rights bill. The basic right is to live in a structurally sound, safe environment where there is running water at the right temperature, and [the residents] don't have to be fearful walking through their parking lot, and it's lighted correctly, and the balconies aren't falling down, and the pools are protected." Until now, Houston officials only inspected apartment communities when they were sold or renovated or in response to specific complaints. The new ordinance calls for any apartment community of three or more units to be visited by a city inspection team on the lookout for fire hazards, exposed wiring, seeping sewage waste and other structural and safety defects. Apartment owners are required to register with the city by Dec. 1, with the inspections to begin April 1. The Houston Apartment Association has announced its support for the program despite the fact that it will involve more fees and work for apartment owners. Association spokesman Andy Teas states, "A lot of times bad law gets crafted after tragedies, because emotion takes over. They really took their time with [this] and created something that's going to be effective and efficient."
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New Orleans Apartment Owners Call Recent Standoff Rare
Digested From "N.O. Area Landlords Call Thursday's Standoff Out of the Ordinary"
New Orleans City Business (11/02/09)
The recent standoff between the New Orleans Police Department and a man who barricaded himself inside his Uptown home armed with a rifle after being served an eviction notice was an extremely rare event, insists Lambert Boissiere Jr., 1st City Court Constable. Every year the constable receives up to 4,000 eviction requests. Out of those, he calculates, less than 25 percent result in a physical eviction. Typically, the owner and resident come to an agreement on their own terms without having to call on the services of the court deputies. When a physical eviction is executed, though, the resident almost always vacates without incident. Tammy Esponge, executive director of the Apartment Association of New Orleans, added that this is the first time she has heard of such an incident in her 17 years in the business. She comments, "I'm not saying there hasn't been trouble before, but this is the most extreme I've seen it go."
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