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RealFacts Reports Apartment Rents Decline in U.S. West and South
Industry News
Real Estate Woes Lead to Rent Discounts in San Joaquin Valley
Amarillo Apartment Market Studied Post-Boom
Reno Rental Rates Increase, Vacancy Rate Falls 1st Time This Year
N.C. Apartment Communites Offering Great Deals to New Residents 
NAA President Culkin Talks Apartments and the Job Outlook
Waiting for the Next McMansion to Drop
West Coast Apartment Owner Promotes Maness
Lower Rents Mean Fewer Apartment Vacancies in San Diego
Insurance Commish Donelon Addresses Baton Rouge Apartment Association
UDR 3Q 2009 Loss Widens On Investment Write-Down
Legislative/Legal News
NY Court of Appeals Deals Blow to Major Apartment Development
Texas Now Requires Apartments to Have Visual Smoke Alarm
Detroit Apartment Owners Decry Lead-Paint Ordinance
The Case Against the Home-Buyer Tax Credit
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RealFacts Reports Apartment Rents Decline in U.S. West and South
Digested From "Apartment Rents Decline in U.S. West as Unemployment Increases"
Bloomberg (10/21/09) by Daniel Taub
RealFacts reports that third-quarter apartment rents declined throughout the U.S. West and South as high unemployment made it increasingly difficult for owners and managers to raise rents. The average asking rent fell to $965 from $1,002 a year earlier, according to the survey of owners of more than 12,600 apartment communities. During the three-month period, the occupancy rate fell below the 92 percent mark. Job losses coupled with cutbacks in consumer spending have been putting undue pressure on apartment owners for months now. A RealFacts statement read: "Renters are in a great position to secure favorable terms. The conditions in the rental market reflect people’s attitude throughout the country. People are tightening their belts by reducing their spending." Of the 33 metro areas tracked, rents declined the most in the San Jose, Calif., market. There, the average monthly price of a rental unit fell 10 percent from a year earlier to $1,536. In California's Oxnard-Thousand Oaks-Ventura region, meanwhile, apartment rents fell 7.4 percent to $1,429 a month. Not far behind was the Seattle area, which saw average rents drop 7.3 percent to $1,036 a month. In total, seven metro areas showed rent increases from a year earlier.
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Industry News
Real Estate Woes Lead to Rent Discounts in San Joaquin Valley
Digested From "Real Estate Woes Make It a Renter's Market in the San Joaquin Valley"
Modesto Bee (CA) (10/25/09) by J.N. Sbranti
In California, monthly rents are down and vacancies are up at many Northern San Joaquin Valley apartment communities. To entice new residents, many owners and managers are cutting rents and offering move-in deals. Current specials range from 50 percent off the first three months rent to first month free with one-year lease. Apartment owners are offering such discounts because they have been unable to fill their units. RealFacts data shows that Modesto's third-quarter apartment vacancy rate was at 10 percent -- among the highest statewide. The average rent charged by Modesto's 28 biggest apartment communities is $816 per month, which is within 1 percent of what units were renting for three years earlier. Researchers, though, point out that those rental rates fail to take into account the discounts new residents are getting. At the same time, many residents are abandoning apartment living to move into rental houses, which have multiplied during the foreclosure crisis. In the past three years, more than 16,400 Stanislaus County homes were lost to foreclosure, including approximately 7,800 in Modesto.
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Amarillo Apartment Market Studied Post-Boom
Digested From "Dwelling on the Numbers"
Amarillo.com (10/25/09) by Karen Smith Welch
ALN Apartment Data President Wayne Williams notes that no Texas apartment market has been immune to the effects of rising unemployment and other economic woes. He remarks, "It's not strong for apartments anywhere in Texas. The economic times have everybody sitting on their hands wondering what they're going to do." Amarillo, in particular, has seen its share of ups and downs. An apartment building boom locally in 2007 helped knock the city's occupancy rate down to 85.3 percent the following year, according to the Amarillo 2009 Housing Survey. Developers added more than 840 units citywide during the boom, the most since 1983. ALN recently placed Amarillo's third-quarter apartment occupancy rate at 89.8 percent. It should be noted that the ALN study contains data from such neighboring cities as Canyon.
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Reno Rental Rates Increase, Vacancy Rate Falls 1st Time This Year
Digested From "Rental Rates Increase, Vacancy Rate Falls 1st Time This Year"
Reno Gazette-Journal (10/24/09)
According to a new CB Richard Ellis report, the vacancy rate for small and mid-sized apartments in Nevada's Reno-Sparks area fell for the first time in a year. Indeed, in the category of communities with eight to 79 rental units, the rate declined to 13.1 percent from 14.06 percent during the three-month period ended Sept. 30. The report states: "This is good news. . . . However, we will not see any substantial improvement in fundamentals until unemployment begins to decrease." From the second quarter to third quarter, average rents in Reno-Sparks rose by 1 percent to $604 a month.
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N.C. Apartment Communites Offering Great Deals to New Residents
Digested From "Apartment Complexes Offering Great Deals to New Renters"
WBTV (N.C.) (10/23/09)
Apartment hunters in the Charlotte metro area are finding there is a fair amount of room for negotiating new leases. The offers currently available range from one month's free rent to waived pet fees and deposits. Ken Szymanski, executive director of the Greater Charlotte Apartment Association, states, "Vacancies are at an all-time high right now. We have 12 percent vacancy in our area. Rent prices are also down about 7 percent from last year." The new Elizabeth Square apartments recently got very creative, hosting an on-site party to introduce interested people to their available floor plans. Property manager Shelley Futch states, "It's competitive out there, but we just try to stand out based on what we offer, and we do offer some good incentives for renters." The deals are also good for those renewing existing leases in and around town. Indeed, such residents are being offered everything from a month's free rent to new flooring. For those who are still not content with the incentives and enticements being offered, analysts and local property professionals say this is a great time to negotiate further. Szymanski states, "It can't hurt to ask the question."
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NAA President Culkin Talks Apartments and the Job Outlook
Digested From "VIDEO: 'Jobs Drive the Economy'"
GlobeSt.com (10/26/09) by Natalie Dolce
National Apartment Association President Doug Culkin spoke on camera with GlobeSt.com reporter Ian Ritter about multifamily housing fundamentals. Culkin told the journalist that he does not expect things to really improve in the apartment sector until the nation's job picture gets better. Culkin was interviewed at the recent RealShare Apartments 2009 event.
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Waiting for the Next McMansion to Drop
Digested From "Waiting for the Next McMansion to Drop"
Wall Street Journal (10/22/09) P. D1; by James R. Hagerty
While some reports point to a housing market rebound -- with bidding wars on distressed properties in some markets -- experts say a recent decline in inventory could be reversed as millions of homes unable to be saved by government foreclosure prevention programs are seized by banks. With additional foreclosures crowding the market, an oversupply of higher-priced homes, and competition from landlords offering rent reductions, experts warn that home prices may have further to fall. In testimony before the Senate Banking Committee, Mortgage Bankers Association chief economist Jay Brinkmann said, "The number of people receiving paychecks will drive the demand for houses and apartments, and the recovery will begin when unemployment stops rising."
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West Coast Apartment Owner Promotes Maness
Digested From "Prometheus Names Craig Maness Vice President of Technology"
Business Wire (10/22/09)
Craig Maness has been promoted to vice president of technology at Prometheus Real Estate Group Inc. Maness, who has more than 17 years of IT experience, most recently served as director of information systems for the company. His new position places him in charge of Prometheus' information services team. In addition, he will oversee all network and server hardware, telecommunications, low voltage/audio video design and property management software for the company's corporate office and more than 18,000 apartments in the Western U.S. Promethus CFO Clay Parker states, "Prometheus relies heavily on technology to best serve our neighbors in all markets, and we are confident that Craig's leadership and understanding of the industry will position Prometheus for continued growth." Founded in 1965, Prometheus ranks as the biggest private owner of apartment communities in the San Francisco Bay Area. Its overall portfolio contains communities in such markets as San Francisco, Seattle, Portland and Los Angeles.
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Lower Rents Mean Fewer Apartment Vacancies in San Diego
Digested From "Lower Rents Mean Fewer Apartment Vacancies"
San Diego Union-Tribune (10/21/09) by Roger Showley
RealFacts reports that apartment vacancies dropped for the first time in a year in San Diego County as lowered rents lured more tenants to large communities. The vacancy rate stood at 5.7 percent as of Sept. 30, down from 6.5 percent in the second quarter and up from the most recent low point of 4.2 percent in 2008's July-through-September period. The turnaround followed average monthly rents dropping from a high of $1,406 one year earlier to $1,376. For its results, RealFacts surveyed 444 area apartment communities, most of which contained at least 100 apartments. Sarah Bridge, co-founder of the California-based company, notes that increased occupancies point to a rising optimism among apartment residents that they can leave their families or roommates and set up their own households. Robert Pinnegar, executive director of the San Diego County Apartment Association, adds that vacancies have been kept in check by the switch from apartment to condo construction during the boom. He remarks, "There has been a softness in the rents, but we have not seen the massive vacancies we have had at other times." Pinnegar adds that several analysts he has conversed with recently believe San Diego will be the second U.S. market, after Denver, to recover from the apartment slump.
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Insurance Commish Donelon Addresses Baton Rouge Apartment Association
Digested From "Louisiana Business: Insurance Commissioner"
BayouBuzz.com (10/22/09)
Louisiana Commissioner of Insurance Jim Donelon addressed the Baton Rouge Apartment Association on Oct. 22 at the Oak Lodge Reception Center in Baton Rouge, La. Donelon discussed the effects of hurricanes on future commercial premiums and the ability to obtain insurance. He also spoke about risk reduction and offered tips for working with agents and adjusters.
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UDR 3Q 2009 Loss Widens On Investment Write-Down
Digested From "UDR 3Q Loss Widens On Investment Write-Down; '09 Guidance Cut"
Wall Street Journal (10/19/09)
UDR Inc.'s third-quarter loss widened as the company wrote down its investment in a couple of joint ventures. The apartment REIT --unprofitable for the past six consecutive quarters -- also lowered its 2009 forecast as a result of the write-down. UDR Chief Executive Thomas Toomey said the write-down should not overshadow "the solid performance of our portfolio." To this end, he noted UDR's stable occupancy rate, lower expenses and steady operating margins. UDR, which owns 45,000 rental units, has seen residents leave on account of unemployment and as lower prices and federal tax incentives have made homeownership more enticing. UDR, though, has managed to reduce costs by using technology, such as social-networking sites, for everything from marketing to communications with residents. In this year's third quarter, 64 percent of new residents came from an online source. That is an increase from 53 percent a year ago. In the latest quarter, the REIT posted a $38 million loss versus a loss of $9.9 million a year ago. In August, UDR partnered with Islamic bank Kuwait Finance House KSC to invest up to $450 million in Class A apartment communities in several key markets. The two sides have since declared their intentions to expand their joint venture.
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Legislative/Legal News
NY Court of Appeals Deals Blow to Major Apartment Development
Digested From "Court Deals Blow to Owners of Apartment Complex"
New York Times (10/23/09) by Charles V. Bagli
Late last week, New York state's Court of Appeals dealt a potentially devastating blow to the owners of the Stuyvesant Town and Peter Cooper Village complexes in Manhattan when it ruled that they improperly began charging market rents on thousands of apartments. The 4-to-2 decision may leave both former owner Metropolitan Life and the current owner, a partnership of Tishman Speyer Properties and BlackRock Realty, liable for nearly $200 million in rent overcharges and damages owed to residents of about 4,000 apartments. With the ruling, the court basically stated that the owners improperly raised rents beyond certain set levels while receiving tax breaks from the city for major renovations. The ruling could affect owners of as many as 80,000 apartments citywide who may also have improperly hiked rents and deregulated apartments while receiving special tax breaks. The most devastating impact is on the Tishman Speyer partnership, which was already facing extreme financial difficulties after paying a record $5.4 billion three years ago for the sprawling site near the East River. The owners are running out of cash to pay building loans, with many expecting a default by the end of the year. If the owners are compelled to reimburse residents, default may occur sooner. The Tishman Speyer and BlackRock partnership originally had $890 million in reserve funds that were established, partly to pay the difference between rent revenues and the monthly debt payments on the property. Manus Clancy, a senior managing director at Trepp, remarks, "The property has never been able to generate nearly enough cash to service its debt. The interest reserve is dwindling, and now the property faces the prospect of taking a hit on its income."
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Texas Now Requires Apartments to Have Visual Smoke Alarm
Digested From "Visual Smoke Alarms Now State Law in Texas"
Examiner.com (10/23/09) by Steve Carter
As of Jan. 1, 2010, Texas apartment owners will be required to purchase and install visual smoke alarms upon request for their deaf, hard-of-hearing, or deaf-blind tenants. Such alarms must be installed in the bedroom where such a resident is or will be sleeping. Deaf-blind individuals who cannot see flashing components must notify their community owner or manager, who will then be required to provide a smoke alarm bed shaker. The owner should buy and install the visual smoke alarm within a reasonable amount of time after they have received your request. Owners should treat the visual smoke alarm provision the same as they would for regular smoke alarms they provide. If they do not require a deposit from their hearing residents for such an alarm, then they should not require a deposit for the visual smoke alarm. Also under the new law, the apartment owner must provide a visual smoke alarm in the bedroom(s) of any children living on the premises who are deaf.
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Detroit Apartment Owners Decry Lead-Paint Ordinance
Digested From "Landlords Decry Ordinance Forcing Them to Clean up Lead Paint"
Detroit News (10/22/09) by Doug Guthrie
In Detroit, child advocates are applauding a new city ordinance requiring the clean up of lead paint inside rental apartments prior to obtaining annual certificates of compliance. Apartment owners, though, are concerned that the sweeping new rules will cost them thousands. Phillip Neuman, legislative chairman of the Detroit Metropolitan Apartment Association, warns, "This is going to dramatically increase the cost to the good [owners]. I can tell you our membership isn't happy about this." The ordinance, which is set to go into effect Jan. 1, will affect owners throughout the year as the specific dates of their annual registrations come due. New inspections could cost as much as $500 apiece, and that is before the price of rehabilitating an apartment found to contain poisonous lead paint. Indeed, abatement of such lead-painted surfaces as walls and windows can cost from $2,000 for a small apartment to $20,000 for a full house, reports Mary Sue Schottenfels, executive director of ClearCorps Detroit. Her organization is currently offering programs to train apartment owners in methods of fixing lead hazards. The Detroit Metropolitan Apartment Association, which represents many of the area's larger apartment owners, calculates that with only 33 percent of the estimated 80,000 rental units in Detroit properly registered, the new law will miss most of its targets while punishing law-abiding owners with new inspection fees. Neuman concludes, "For an apartment [community] that has up to 600 units, the cost of the inspections alone will be astronomical. We think this was aimed at the single-family units that are more likely to not be in compliance, but it is still going to cost complex operators who are largely in compliance."
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The Case Against the Home-Buyer Tax Credit
Digested From "Kill the Wasteful Home-Buyer Tax Credit"
MarketWatch (10/20/09) by Rex Nutting
In this MarketWatch commentary, columnist Rex Nutting criticizes the likely extension of the $8,000 federal tax credit for first-time homebuyers. He calls the tax credit "an extremely ineffective stimulus" that "mainly rewards the very people who got us into this mess" and "a futile attempt to blow just a little bit more air into the real-estate bubble." Nutting cites research from Brookings Institution Co-Director of economic studies Ted Gayer that indicates the tax credit cost the government $43,000 per house this year, and extending the credit through June 30 would boost the cost to $258,000 for each additional house sale. Nutting adds that the tax credit fails to address the oversupply of houses, which continues to put downward pressure on house prices, and that prompting renters to become homeowners simply occupies a vacant house but creates a vacant apartment unit. Nutting says a subsidy that would make more sense would involve encouraging young adults to move out of their parents' house into an apartment.
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