NAA Industry Insider: How Rising Household Formation Will Affect Apartments | National Apartment Association

NAA Industry Insider: How Rising Household Formation Will Affect Apartments

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How Rising Household Formation Will Affect Apartments
Digested From "Conditions Are Ripe for Household Formation"
Housing Wire (07/15/13) Hopkins, Megan

Data from several analysts points to a sharply positive shift in U.S. household formation that has triggered rising demand for all types of housing over the past couple of years, including multifamily and single-family rental and ownership. The researchers note that conditions are ripe for adult children to move out of their parents' homes and for college graduates to rent their first apartments. Amid the upturn, multifamily housing permit growth has outstripped single-family permit growth. "Assuming job growth remains at or above the current pace," the analysts conclude, "we expect these trends to continue." The analysts wrote in a report on housing demand: "We believe steady, if unremarkable, monthly job growth is creating a similar household formation environment for 2013 which should support our positive housing outlook."
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Market Trend Insights

Developers Vote for D.C.'s Apartment Sector. Will Residents?
Digested From "Delta: Demand for Region's Class A Apartments Grows"
Washington Post (07/21/13) Montgomery, Grant

The Washington, D.C., metro area's apartment sector continues to grow ever more competitive. Residents have more than 50 newly delivered communities to choose from throughout the region, which should translate into a temporary period of increased negotiating power for residents as owners look to fill 17,000 rental units that will be arriving in the market over the next year. However, the surplus of apartments may be short-lived, as demand grows to record levels for Class A units in particular. From an owner's perspective, this year's second quarter was a mixed bag of good news and potentially disturbing trends. On the positive side, Class A absorption levels (or the change in the number of occupied units) and absorption pace per community (the number of net units leased) point to solid demand. However, monthly rents have started to markedly decline in more than 50 percent of the region's submarkets, especially in those that are burdened with high levels of new supply. Finally, the D.C. area's development pipeline remains oversized compared to projected demand, and the near-term future of the regional economy -- in light of federal austerity measures -- is still a question mark. Rents for all investment-grade apartments declined 0.8 percent over the last 12 months, falling for the first time since 2009.
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Two Reasons Why Madison Is the Capital of Apartments
Digested From "The Apartment Building Boom Is Back in Madison"
Isthmus Daily Page (07/18/13) Krause, Jason

The city of Madison, Wis., has erupted with new apartment construction. In 2012, more than 1,000 new rental units were approved by officials in the state capital. The two factors driving the local construction boom are low interest rates and strong demand for rental housing. The Madison Department of Planning and Community and Economic Development notes that there are more than a dozen large apartment communities that are now under construction and as many as 25 more planned in the next couple of years. Over the past few years, medical records software giant Epic, based in nearby Verona, has hired thousands of recent college graduates. Apartment owners and managers are hopeful that this veritable army of young, highly paid professionals will want to live in or around downtown Madison in one of many new apartments under construction.
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Multifamily Plunge to Blame for Big Drop in June Housing Starts
Digested From "U.S. Housing Starts Fall by 9.9 Percent in June"
Wall Street Journal (07/18/13) P. A2 House, Jonathan; Mitchell, Josh

A Commerce Department report shows that June housing starts declined 9.9 percent from May to a seasonally adjusted annual rate of 836,000 units. The drop in housing starts was propelled by a 26 percent plunge in multifamily construction, a category that has lately shown signs of overbuilding. Starts for single-family homes, by contrast, slipped 0.8 percent. Meanwhile, building permits -- a key measure of future construction activity -- declined 7.5 percent in June. Both readings were significantly worse than projected.
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The Rising Demand for Rental Hosuing
Digested From "The Rising Demand for Rentals"
Fox Business (07/18/13)

National Association of Home Builders CEO Jerry Howard reasons that house sales have been healthy as of late due to interest rates ticking up. As a result, he observes, more and more "fence-sitters are starting to jump into the market." Despite that, the rental housing market remains strong. Dick Burke, senior vice president at, says demand for such units has been building for the past several years. Builders plan to introduce about 130,000 new units to the market this year, and it still mayl not be enough to meet the pent-up demand, he says.
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Deals and Transactions

Calif. REIT Messes With Texas in Latest Apartment Buy
Digested From "Steadfast Income Buys Two DFW Apartment Communities"
Dallas Business Journal (07/15/13) Carlisle, Candace

Steadfast Income REIT Inc. purchased a couple of North Texas apartment communities for a total of $31.9 million with plans to update the rental units at each. With this latest deal, the Irvine, Calif.-based REIT has more than 9,250 apartments across the Midwest and Southwest U.S. Specifically, Steadfast Income purchased the 350-unit Waterford on the Meadow in Plano and the 131-unit Arbors of Carrollton as part of a larger $50 million acquisition that included one apartment community in Indianapolis. It will be looking to update the apartments with upgraded appliances and apartment accessories.
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Waterton Associates to Sell Stake in Chicago Apartment Towers
Digested From "This Apartment Sale Will Test the Market's Strength"
Crain's Chicago Business (07/22/13) Gallun, Alby

Waterton Associates LLC has hired brokerage Eastdil Secured LLC to sell a 49 percent ownership interest in Presidential Towers, a four-building development on Chicago's West Loop that boasts 2,346 rental apartments. Locally based Waterton paid $475 million for the property six years ago, just as the real estate market was peaking. This latest sales effort will test the strength of a downtown apartment sector that many believe is once again cresting. Among the most vocal proponents is Ron DeVries, vice president at Appraisal Research Counselors. He states, "If you're looking to recapitalize the asset, this is the time to do it." Downtown apartment values have indeed skyrocketed in the last couple of years, as high occupancies and rents have boosted property incomes. At the same time, historically low interest rates have increased investors' buying power. On the downside, there remains a wide gap between Chicago's big downtown high-rises, which have drawn frenzied bidding activity from deep-pocketed institutional investors, and the smaller apartment communities in outlying neighborhoods and suburbs where prices have not climbed nearly as much. "The capital has been cherry-picking assets," Real Capital managing director Dan Fasulo concludes. Presidential Towers is expected to spark the most interest from overseas investors and large institutional investors in need of putting a lot of money to work.
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Industry Buzz

Like Riding a Bike, You Won't Forget This Latest Apartment Amenity
Digested From "Boston Sees Its First Real Estate Co., Bike Sharing Partnership"
BostInno (07/19/13) Weaver, Alex E.

As more and more apartment communities break ground in Boston, amenities are emerging as the key differentiator in attracting residents. Bike sharing looks to be the latest hot offering. Related Companies and property-based bike sharing company Zagster have teamed up to form Beantown's first such offering by a local real estate company. Luxury apartment community One Back Bay is expected to offer the service first, enabling its residents to enjoy the convenience of two wheels on-demand. Daria Salusbury, senior vice president of Related, states, "Residents will be able to experience the ultimate in convenience while exercising, running errands and living green." Timothy Ericson, co-founder and CEO of Zagster, concurs. He states, "Related understands the changing dynamics of today's urban resident, who is very interested in sustainable, convenient and efficient transportation." This new amenity will give apartment residents the option to ride without the burden of owning, maintaining, and, worst of all, storing a bike of their own.
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Is Downtown L.A.'s Low-Rise Building Spree Causing Harm?
Digested From "Is Downtown's Low-Rise Building Spree Hurting the Community?"
LADT News (07/15/13) Vaillancourt, Ryan

Downtown Los Angeles is once again welcoming new housing development. Boosters say more housing will surely bring more restaurants, entertainment spots, and retail establishments. But some worry that sites that could accommodate high-rises instead are being filled with five- to seven-story apartment communities more commonly seen in the suburbs. "In some of the areas where we have the most allowable density, which were intended from 30 years ago to be high-rise zones, we're getting five-story buildings," laments City Planning Director Michael LoGrande. "A lot of the growth that we need to accommodate the future could be on these sites, right next to transit. That opportunity could be lost." However, wood-framed apartment communities are less expensive to build that steel-framed high-rises, which is part of the trend. Additionally, buildings that exceed 75 feet in the city are required to implement type-one construction, which relies on sturdier steel and concrete engineering to withstand earthquakes. While market factors may ultimately be the driving force of density decisions, the regulatory challenges to building high-rises have a better chance of being altered now than later. The Planning Department is embarking on a five-year effort to overhaul the city's 1946 zoning code, and officials plan to spend at least the first two years focusing on the part of the code that deals with downtown L.A.
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A Caring Apartment Owner Is Recognized in Memphis
Digested From "Memphis Landlord Helps Tenant Gets Back on his Feet" (Memphis) (07/15/13) Hartman, Anna M.

Memphis apartment owner Bill Brown is getting high marks for recently lending a helping hand to one of his residents. Randall Sowell has rented a unit from Brown for the past eight years. When Sowell injured his ankle last summer and lost his job, he thought he would eventually be evicted. But Brown did not evict him. Instead, he allowed Sowell to do odd jobs for him and the apartment community until he could get back on his feet. "He helped me out a lot," Sowell told Action News 5 in Memphis. Sowell said he hopes surgery will repair his ankle and get back to work so he can begin paying his monthly rent again.
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Legal/Legislative Did You Know

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A Majority of Voters Favor the Ax for Fannie Mae, Freddie Mac
Digested From "Most Voters Favor the Ax for Fannie Mae, Freddie Mac"
The Business Journals (07/15/13) Hoover, Kent

As the debate over the fate of Fannie Mae and Freddie Mac heats up, a new survey shows that most Americans support winding down the two government-sponsored enterprises. Commissioned by the American Action Forum, On Message Inc. polled 1,200 likely voters in conservative, Democratic-leaning, and swing districts. More than half of respondents -- 52 percent -- were in favor of phasing out the GSEs, while only 32 opposed that approach. The share of survey participants backing a phase-out climbed to 59 percent after Fannie and Freddie's role in the housing bubble and the amount of money required to bail them out of it was explained. "Even a majority of Democrat voters are negative toward both entities," noted Wes Anderson of On Message. "Voter opinions about Fannie and Freddie and their future all but collapse when reminded about the massive nature of taxpayer bailouts they received." Washington provided $187.5 billion to keep the two GSEs afloat during the financial crisis, although most of those funds have been repaid.
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Which Ga. Town Is Set to Begin Apartment Inspection Program?
Digested From "Brookhaven to Begin Apartment Inspection Program"
Reporter Newspapers (07/19/13) Weinman, Melissa

The city of Brookhaven, Ga., will begin inspecting apartment communities Aug. 5. City officials will inspect the exteriors of Brookhaven’s 66 apartment communities in order to ensure compliance with minimum life safety standards. City officials hopes to have all inspections completed within 18 months. The inspections are part of a citywide initiative to bring all apartment communities up to code. How it will work is an independent third-party inspector will evaluate the exteriors of the buildings and mechanical systems, in addition to such common areas as swimming pools, playgrounds, parking lots, and elevators. Spanish interpreters will also be on site when needed to answer questions from apartment owners, managers, and residents. Apartment owners will then be required to fix any issues cited by inspectors within a specified amount of time or risk code violations. Mayor J. Max Davis remarks, "It is our duty as a city to ensure that multifamily [homes] comply with life safety, maintenance, and fire codes."
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More Apartment Owners Look to Snuff Out Smoke
Digested From "Chattanooga Landlords Move to Ban Smoking in Rental Units Amid Growing Concerns of 'Third Hand' Smoke"
Chattanooga Times Free Press (TN) (07/21/13) Bradbury, Shelly

Smoke-free apartment communities are becoming increasingly common throughout the country as a growing number of apartment owners ban residents from lighting up in their units. This may soon be very evident in Chattanooga, where there are about 1,400 new apartments in the pipeline. Currently, around 23 percent of Tennesseans smoke -- higher than the 18.4 percent of all Americans who smoke, reports the Centers for Disease Control and Prevention. As such, some local apartment communites are not quite ready to go 100-percent smoke-free. Charity Facemire, property manager at the 232-unit Cross Creek Villas, has yet to implement a smoking policy. She states, "What someone does in their apartment is their private business so we don't have anything to do with that." While apartment owners and managers institute bans out of concern for residents' health, cost is perhaps a bigger factor. It's more expensive to clean and turn around a smoker's apartment, notes the National Center for Healthy Housing. In a non-smoking apartment, Center researchers calculate that cleaning, painting, and flooring costs average around $560. By comparison, a unit that housed a heavy smoker can cost as much as $3,500 to get ready for the next resident.
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NAA Announcements

Only Three Weeks Left to Save on Registration for the 2013 Apartment Revenue Management Conference

Register by August 14 to save $100 on admission to the rental housing industry’s sole event dedicated to staying ahead of the ever-evolving operational curve: the Apartment Revenue Management Conference, September 23-25 at the Turnberry Isle Resort in Miami.

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We've Saved You A Seat For Webinar Wednesdays

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7/24/13 Rommel Anacan - Dollars and Rents: How to Help Your Teams Navigate Residents Through the Changing Rental Market

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9/4/13 Mike Whaling - Get Yours Wheels Turning! HOW TO: Apply and Measure the “Hub-and-Spoke” Model of Online Marketing to Apartment Marketing

9/18/13 Eric Broughton - Beyond Craigslist

Learn more and register today!
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Property Managers: Raise Your Game With NAA Connect

Property Managers from around the country are gaining an advantage over their competition with a little help from the Property Managers’ Community on NAA Connect.

Current discussion topics include ways to leverage your laundry room to be more of an amenity and make laundry a little less unpleasant for your residents, preventative maintenance programs and more. Don’t miss out on the competitive edge you can get from the innovative ideas and collaboration in the Property Managers Community. Get connected today.

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‘Rewind’ and Earn CECs

Couldn’t attend the 2013 NAA Education Conference & Exposition in San Diego, or missed a great session? Don’t despair—you still can enjoy the best education sessions in the apartment industry, including video!

NAA’s Education Institute (NAAEI) is once again presenting its “Rewind” program, offering 21 recorded video sessions and 20 PowerPoint-synced audio sessions from the 2013 NAA Education Conference & Exposition—all for just $299!
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NAAEI Designation Courses Offered Near You!


Nevada State Apartment Association
September, 2013

Roanoke Valley Apartment Association
November, 2013

CAM Online


Chicagoland Apartment Association
July - August, 2013

Central Iowa Apartment Alliance
September - October, 2013

Hampton Roads Apartment Council
September – October, 2013

Greater Charlotte Apartment Association
October - November, 2013

Apartment Association of Greater Los Angeles
November - December, 2013


Nevada State Apartment Association
September, 2013

Roanoke Valley Apartment Association
November, 2013

NALP Online


Greater Charlotte Apartment Association
August, 2013

Roanoke Valley Apartment Association
September, 2013

Find more courses in your area on the NAA website.

For more information about any of the classes listed, please contact Kimberly McCrossen at 703/518-6141 ext. 121.
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July 23, 2013

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