'Missing Households' Represent Big Source of Pent-Up Demand
Digested From "'Missing Households' Represent Big Source of Pent-Up Demand"
Inman News (07/24/13) Hagey, Paul
A recent analysis by Trulia chief economist Jed Kolko found that household formation, especially among young adults age 18 to 34, trails historical norms. However, he predicts the metric will bounce back slowly in the years to come. Prior to the housing bust, an average of 1.1 million households -- defined as one or more people who live in the same home -- were formed each year throughout the United States. During the bust period spanning the first quarter of 2008 through the first quarter of 2011, only about 450,000 households formed each year. That helped create an estimated backlog of 2.4 million households that should be factored into forecasts for the coming years, according to Kolko's research. Analyzing data from the U.S. Census Bureau's Current Population Survey, he concluded that a majority of the "missing households" are young adults who have yet to leave their parents home. Prior to the housing crisis, 27 percent of Americans ages 18 to 34 lived with their mom and/or dad. Today, 31 percent of people in that demographic still have not struck out on their own, reports Kolko. This is due mainly to the job market. Roughly 44 percent of those without jobs live with their parents versus 25 percent with jobs. In its annual "State of the Nation's Housing" report, Harvard University's Joint Center for Housing Studies concluded that demographic drivers support household growth of approximately 1.2 million a year for the remainder of the current decade, which is about where it was for the years prior to the housing bust.
Market Trend Insights
As More Americans Rent, Apartment Owners Stand to Benefit
Digested From "Rents Not Easing Despite Rise in Rates; Owners Are Benefiting"
Los Angeles Times (07/27/13) Sichelman, Lew
The number of Americans who rent increased more than 1.1 million during 2011-12 -- the eighth year in a row of expansion, according to a Harvard University study. An increase in demand means an increase in rents, regardless of what is happening on the buying side of the housing market. The Census Bureau's Housing Vacancy Study shows that the median asking rent for vacant apartments in 2012 was at a record high $720 a month. MPF Research found similar strength in the nation's metropolitan statistical areas (MSAs). Apartment residents in such markets as Las Vegas, Albuquerque, Tucson, or Greensboro did see their rent decrease last year. However, those who rent in any of the other 89 MSAs monitored by MPF Research saw their monthly rates rise -- in some markets, significantly. In Honolulu, for instance, apartment rents climbed 8.5 percent last year. San Francisco (up 8 percent) and San Jose (up 7.7 percent) were not far behind. It is definitely an owners' market in these locales. The MPF report cites a National Council of Real Estate Investment Fiduciaries study, which shows institutional owners registered a solid 6.1 percent increase in revenue for 2012.
NW Ark. Apartments Are Full -- So What Are Developers Waiting for?
Digested From "Northwest Arkansas Apartments Full, Student Housing on the Rise"
Fayetteville Flyer (07/25/13) Gill, Todd
The Northwest Arkansas apartment market continues its upward path for both rental rates and occupancies. According to a new report by CB Richard Ellis, units in the region are nearly full while rents continue to rise. Overall apartment occupancy in mid-2013 averaged 96.5 percent, up from 94.5 percent at the midpoint in 2012. Meanwhile, average rents are $588 a month -- an increase of $22 from the median rent a year ago. While vacancy rates are low, new construction has come to a relative halt outside of the student housing projects being built in Fayetteville. The only non-student community with more than 50 apartments currently under construction in the area is Lindsey Management's expansion of the Copperstone Apartments in Bentonville. According to Brian Donahue, an apartment specialist with the CBRE Northwest Arkansas office in Fayetteville, developers may be waiting to see how the increase in student housing in the city affects the vacancy numbers before moving forward with new apartment communities.
Two Reasons Why Denver Vacancies Are at a 13-Year Low
Digested From "Metro Denver Apartment Vacancies Fall to a 13-Year Low"
Denver Post (07/25/13) Pankratz, Howard
A new report by the Apartment Association of Metro Denver and the Colorado Division of Housing shows that the apartment vacancy rate in metropolitan Denver fell to 4.2 percent during the second quarter of 2013, reaching the lowest vacancy rate recorded since the third quarter of 2000. Rocky Sundling, immediate past president of the Apartment Association of Denver, said demand for rental units is coming from two sources -- the influx of people moving to the area and job growth from a recovering economy. At the same time, the average rent for all apartment types in metro Denver increased 4.3 percent to $1,022 over 2012. But Sundling noted that between 12,000 and 15,000 new apartments will be delivered over the next two years. "You factor increasing demand with a constrained supply -- that's leading to the increased rents," Sundling concluded.
Sonoma County Owners Raise a Glass to Tightening Apartment Market
Digested From "Sonoma County Rental Market Tightens"
Petaluma Argus Courier (CA) (07/29/13) Digitale, Robert
In California, Sonoma County's average monthly apartment rent has climbed 6.9 percent in the past 12 months to $1,335. According to RealFacts, that was among the biggest increases in the state's largest metro areas, behind only San Francisco, San Jose, and Santa Barbara. Nearly 98 percent of Sonoma County's rental units were occupied as of June 30, the second-highest occupancy rate among two dozen metro areas surveyed. By comparison, the rate stood at 96.2 percent a year earlier. Analysts report that the rising monthly rents and tight occupancies are likely tied to a lack of new housing. RealFacts spokesman Nick Grotjahn laments, "There just hasn't been any development in Sonoma County." In fact, Sonoma has not added any market-rate rental apartments in three years, reports RealFacts, and only 71 such units have been built since the end of 2007. Since 2010, the county's average apartment rent has climbed almost 13 percent, while the occupancy rate has outpaced the average growth for communities in Northern California. Now, the outlook is for more rent hikes considering that owners and managers are encountering such high demand. Grotjahn concludes, "They aren't fearful that if they raise rents, they're gong to lose someone."
Why Are Rental Market Worries on the Rise in Calgary?
Digested From "Rental Market Worries Rise in Calgary"
Calgary Herald (Canada) (07/27/13) Southwick, Reid
In Calgary's increasingly tight rental apartment market, some owners and managers have ceased advertising widely because they are routinely flooded with responses from eager, potential residents. There are now concerns the competition could grow even fiercer as apartment communities remain uninhabitable following last month's flood activity and as university students return to classes. Calgary now ranks among the fastest-growing cities in North America, according to new civic census data released earlier this month. Mayor Naheed Nenshi predicted this week that the city's rental vacancy rate could come close to zero due to last month's big flood. Calgary and Edmonton had the lowest vacancy rate of any major Canadian city in April at 1.2 percent, reports the Canada Mortgage and Housing Corp. Calgary rents jumped by more than 7 percent over a 12-month time span -- the largest annual rise in Canada, as the average rent for a two-bedroom apartment reached a record C$1,202.
Deals and Transactions
Teacher Fund Learns Selling Apartments Is the Right Lesson Plan
Digested From "Teacher Fund Selling Apartments Back"
KUAR News (AR) (07/27/13) Wallace, David
The Arkansas Teacher Retirement System's board has voted in favor of selling back its ownership stake in more than 1,700 apartments it acquired over a decade ago to Lindsey Properties. Board members anticipate selling the apartment communities for about $46.3 million -- nearly $4 million more than it paid for them in 2001. The communities brought a 7 percent return on investment in the first five years of ownership and 8 percent the last seven. However, high maintenance costs have eaten into that return. According to Retirement System Executive Director George Hopkins, the amount going for maintenance was about 16 percent of the communities' total annual revenue. Hopkins insists that the Arkansas Teacher Retirement System remains interested in the apartment sector as investment, but will shy away from communities that are more than 25 years old.
New Downtown Des Moines Apts Already at Full Capacity
Digested From "New Downtown Apartment Buildings Already at Capacity"
Des Moines Register (07/25/13)
Two new downtown Des Moines apartment communities that opened in June are already fully leased. The Fleming Building leased out all 96 of its units in less than two months, while Rocket Transfer Lofts is also at 100-percent capacity. According to a 2013 Commercial Appraisers of Iowa CBRE/Hubbell Commercial survey of apartments in Des Moines, the vacancy rate for the city's central business district is 2.7 percent for 2013 because many people want to live there. The highest vacancy rate in the city is at 4.7 percent in the east area. The overall vacancy rate for apartments in the city is 4.2 percent, which decreased from 5.3 percent in 2012.
Which Developer to Do Battle in Private Military Housing Niche?
Digested From "Developer Takes Gamble on Private Military Housing"
Wall Street Journal (07/24/13) Wotapka, Dawn
In Maryland, Fort Meade will be home to the U.S. Army's first privately built on-base apartment community for single, lower-ranking enlisted men and women. Dubbed Reece Crossings, this new community will offer service members an attractive alternative to living in barracks and enduring cramped rooms with shared showers once completed in December. Unlike typical barracks, it will boast over 800 beds in spacious one- and two-bedroom apartments with private bathrooms, full-size kitchens, washers and dryers, and big living rooms. In addition, Reece Crossings will have a swimming pool, a fitness facility, and even videogame kiosks. The development represents a gamble for developer Corvias Military Living, which is funding the entire $72 million construction tab. It is also required by the Army to recruit residents on its own, leaving it at risk of unfilled beds. Service members will also have to demonstrate enough maturity and responsibility to receive approval to live in the community, according to an Army spokesman. Corvias CEO John Picerne believes the time has come for such an apartment community. He reasons, "With the unrest across the globe, our service members deserve a higher quality of life and a space where they [can] enjoy their time off [and] their time with others." He and his development team believe many service members will jump at the chance. While traditional barracks are free of charge, soldiers who want to live in private housing will receive a monthly housing allowance. Reece Crossing is due to charge monthly rent of $1,296 a person for each bedroom in a two-bedroom unit -- roommates can be selected or matched via a questionnaire -- and $1,624 for a one-bedroom.
Apartment REIT Sets Terms for $42 Million IPO
Digested From "Apartment REIT Independence Realty Sets Terms for $42 Million IPO"
Renaissance Capital (07/28/13)
Independence Realty Trust has announced terms for its initial public offering on Friday. The Philadelphia-based REIT, which owns eight apartment communities, plans to raise $42 million by offering 4 million shares at a price range of $10 to $11 a share. Independence Realty Trust would command a fully diluted market value of $101 million at the midpoint of this proposed range. Founded in 2009, the REIT's portfolio today contains more than 2,000 apartment units. Indepedence Realty Trust plans to list on the New York Stock Exchange under the symbol "IRT."
The Real Money Is in Multifamily Development
Digested From "The Real Money Is in Multifamily Development"
RealtyBizNews (07/22/13) Kline, Brian
The multifamily housing market presents a development opportunity as there are roughly 2 million fewer units available today than there were at the peak of the market in 2007-2008, despite a growing population. Analysts say that markets like Boston and New York are seeing rents level off as predicted, while among the markets taking off are Silicon Valley; Raleigh, N.C.; Memphis; Seattle; and even previously hard-hit Phoenix and Las Vegas. As younger Americans -- those under age 30 -- return to the work force, demand for rental housing is expected to continue increasing for at least the next five years at a growth rate of aroudd 25 percent a year -- a phenomenal rate considering the market is already at a new peak.
What's Behind AvalonBay's 77 Percent Plunge in Q2 Earnings?
Digested From "AvalonBay Profit Plunges 77 Percent on Acquisition Costs"
MarketWatch (07/24/13) Stynes, Tess
AvalonBay Communities' second-quarter earnings plunged 77 percent due to the acquisition of its stake in Archstone Enterprise earlier this year in addition to the drop in gains from dispositions of real-estate assets. For 2013, the firm tightened its per-share funds from operations estimate from $5.25 to $5.05. For the current quarter, the company forecasts per-share FFO of $1.13 to $1.19, which is less than analysts' consensus estimates. The apartment REIT has shifted its strategy by separating into three brands that include upscale units, moderately priced suburban housing, and a segment geared to younger apartment residents in urban areas.
Legal/Legislative Did You Know
Where There's Smoke, There Are Apt. Safety Concerns in Green Bay
Digested From "Recent Fires Raise Safety Concerns for Older Apartment Buildings"
Appleton Post-Crescent (07/27/13) Williams, Scott Cooper
More than 100 apartment communities in the Green Bay metro area are big enough to require modern fire safeguards, but are old enough to be exempt. That is one the main findings of a Press-Gazette Media probe into apartment fire safety in the aftermath of destructive fires recently at Hilltop Place Apartments in suburban Allouez and Northern Pines Apartments in nearby Howard. Dozens of other apartment communities in Green Bay, De Pere, Ashwaubenon, Allouez, and Pulaski share some of the same characteristics as Hilltop Place and Northern Pines. Most importantly, all of the communities were erected prior to 1995. This means they were exempted when fire safety codes were updated to require sprinklers or firewalls in communities with 20 or more apartments. Owners and managers of older apartments contend they cannot justify the cost of retrofitting their communities, but are confident that their existing fire prevention measures are adequate. Regardless, the two recent blazes have caused more and more local apartment residents to raise questions. Lt. Jody Crocker of the Ashwaubenon Department of Public Safety said people hunting for apartments should factor safety into their considerations as much as monthly rents. Things to look (and ask) for in older communities include smoke detectors, carbon monoxide detectors, and whether employees regularly inspect dryer vents and bathroom exhaust fans for fire hazards. Wisconsin officials could set tougher standards for older apartment communities. To date, they have elected not to as a group.
What Are the Perverse Effects of NYC Rent Regulation?
Digested From "The Perverse Effects of Rent Regulation"
New York Times Magazine (07/28/13) P. MM14 Davidson, Adam
About 50 percent of Manhattan apartments are rent regulated by programs that tie funding to apartment units, not people, creating an incentive for people to stay in apartments that no longer meet their needs. As a result, there is a housing shortage and a majority of people in rent-regulated apartments earn much more than the poverty level, according to data from NYU's Furman Center for Real Estate and Urban Policy. Columbia Business School housing economist Christopher Mayer says that without rent regulation, twice as many apartments would be on the market, causing market-set rates to decline as older units are upgraded and carry higher rents. Mayer suggests that rent regulation be replaced with a system that increases apartment owners' property taxes and additional revenue to the city could be used to help the poor afford market-rate apartments. Over the last 30 years, about 231,000 units have been deregulated, and every year, thousands more are being torn down and replaced, eventually putting an end to rent regulation.
Indiana Apartment Pools Go Off the Deep End in Failing Inspections
Digested From "Several Pools Fail Health Department Inspections"
ABC57.com (07/29/13) Norwood, Jasmine
ABC 57 in South Bend, Ind., recently uncovered inspections that show several apartment communities in St. Joseph County that did not pass their health inspections. As a result, the county's health department had to temporarily shut them down. Among the area apartment communities that had their pools closed because of what inspectors found were the Georgetown Apartments, Clover Village, and Edison Point. Their issues and violations have been resolved, and each pool has since reopened. Kevin Harrington with the St. Joseph County Health Department says jumping into a pool with too much chlorine is not a smart idea. He explains, "It can start affecting your kidneys, also damage your eyes, your hair, your clothing, things like that." Conversely, a pool that does not have enough chlorine can be just as dangerous, as it can become a breeding ground for deadly bacteria like Ecoli. Children and the elderly are most at risk of such bacteria. Harrington further noted, "There are a number of factors that bring Ecoli into the pool: dirt, debris, dust, people getting in without showering." Not to mention the little swimmers who occasionally go to the bathroom in the pool.
Cost-Savings Alert! Just Two Weeks Remain to Save on Registration for the 2013 Apartment Revenue Management Conference
One surefire way to increase revenue is by decreasing costs; one irrefutable method for doing so is saving $100 by registering before August 14 for the Apartment Revenue Management Conference, September 23-25 at the Turnberry Isle Resort in Miami.
The rental housing industry’s only event dedicated to staying ahead of the ever-evolving operational curve, the Apartment Revenue Management Conference features a radically expanded scope of topics to include ancillary income, expense management, business intelligence and other subjects designed to aid you reach your organization’s revenue goals.
The 2013 Apartment Revenue Management Conference is the place to be for any rental housing professional interested in boosting net operating income through best practices, benchmarking and incorporating ideas from outside the industry.
On that last point, you’re sure to hear things that aren’t offered elsewhere, including Keynote Speaker Greg Cross, Senior Vice President of Revenue Management for Hyatt Hotels Corporation, discussing current trends in lodging and their possible parallels in the rental housing industry.
“NOI is Everywhere,” as the conference’s theme promises; but there is only one place to learn all about it. Register now.
Learn How to Connect in 12 Clicks
Is a fear of change keeping you from joining the newest and most exclusive industry social network around?
If you haven’t joined NAA Connect, which replaced the former NAA Community Site this spring, then you’re missing tons of valuable collaboration to boost your career.
Learn how to connect in just 12 clicks and then get started today.
Webinar Wednesdays Are The Perfect Online Learning Opportunity
Join NAAEI, Apartment All Stars and Multifamily Insiders for Webinar Wednesdays, the largest premium webinar series in the industry to provide state and local association members with access to industry thought leaders to discuss innovative ideas, best practices and emerging industry trends. These webinars will give participants the tools they need to become industry superstars in their own right.
8/7/13 Anne Sadovsky - What's New and What's Hot in Fair Housing
8/21/13 Stephanie Graves - How To Make Your Residents Work For You - Resident Referral Ideas That Work
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!
‘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!
NAAEI Designation Courses Offered Near You!
Nevada State Apartment Association
Roanoke Valley Apartment Association
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
Roanoke Valley Apartment Association
Greater Charlotte Apartment Association
Roanoke Valley Apartment Association
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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