How Low Can the U.S. Homeownership Rate Go?
Digested From "Dream Lost as U.S. Homeownership at 18-Year Low"
BusinessWeek (07/30/13) Gopal, Prashant; Benson, Clea
After peaking at 69 percent in 2004, the U.S. Census Bureau reports that the country's homeownership rate has retreated to a nearly 18-year low of 65 percent. According to London-based Capital Economics Inc., the rate will fall even further -- to 64 percent -- in the coming year as even more households exit the foreclosure process and are forced to rent housing. While older Americans have been among the least affected by the decline in owner-occupants, first-time buyers and minorities have borne the brunt of the trend.
Market Trend Insights
Two Factors Driving D.C.-Area Apartment Investment Sales
Digested From "Washington Apartment Investment Sales Heady"
Washington Post (08/04/13) Donaldson, Justin
Washington, D.C.'s apartment investment market continues to draw capital, driven two factors -- a strong market and a long-term outlook of continued growth in rents. The region's apartment sector is holding up well in light of the large slate of new communities hitting the market. Local investors, national REITs, and even foreign investors continue to buy Washington-area apartment assets. Volume last year was off the robust pace of 2011 and is on a similar pace this year. In the long term, however, the D.C. metro area's apartment market prospects are extremely bright in light of lifestyle, economic, and demographic trends. Through May, the transaction volume for Class A communities totaled $403 million. Although total sales for the year have been down, there has been improvement in price per unit for Class A apartment sales. High-rises have sold for one-third more per unit in 2013 than a year ago, and Class A garden apartment communities are selling for 26 percent more per unit. Through early June, there were 19 Class B apartment sales totaling more than 7,100 rental units and approximately $1.4 billion. During the same time span a year ago, there were 13 Class B apartment community sales totaling $512 million. Next year and in 2014, researchers expect Class B vacancy rates to continue to rise locally as a large pipeline of Class A assets is brought to market.
Two Reasons Why Millennials Are Living With Mom and Dad
Digested From "Pew Study: More Millennials Are Living With Parents"
Associated Press (08/01/13)
The Pew Research Center estimates that 21.6 million people aged 18 to 31 years -- or roughly 36 percent of the millennial generation -- are living with their parents. Pew researchers blame the increase on such factors as more young people enrolling in college -- students who live in campus dorms are still considered living with their parents, according to the census -- and fewer job opportunities for this age group. The Center's analysis of census statistics shows that it has been at least 40 years since this many young adults were living at home. About 32 percent had such an arrangement in late 2007, just prior to the Great Recession.
How Baltimore's Apartment Market Became SO Tight
Digested From "Baltimore's Rentals in High Demand, Fueling Building Boom"
Baltimore Sun (08/04/13) Kilar, Steve
A limited supply of quality apartments in Baltimore's popular neighborhoods -- such as Federal Hill and Fells Point -- have residents scrambling to secure leases. Developers, meanwhile, are rushing to renovate buildings erected decades ago for offices and other uses and transforming them into rental housing, especially in and around downtown. Space is so tight that some prospective apartment residents are offering to pay more than the asking rent to get their desired unit. Others are offering to sign a longer-term lease -- two or more years -- to keep from losing out to another applicant. In turn, more owners and managers are interviewing prospective residents and weighing factors beyond credit and criminal background checks, including whether the applicants are roommates or if they have pets. Reis Inc. reports that the apartment vacancy rate in Baltimore's city center fell to 4.8 percent by the end of June. Four years earlier, the vacancy rate was almost twice that.
Three Reasons Why Houston Apartments Are Going Smaller
Digested From "The Houston Apartment Market's Ugly Duckling: No One Wants These Units"
CultureMap Houston (08/01/13) Bivins, Ralph
In the Houston market, three-bedroom apartments are no longer needed and developers are no longer building them. Single people and couples dominate the local apartment sector today, leaving little demand for the larger, three-bedroom units. The growing demand for smaller apartments locally also lies, in part, with the fact that more and more people do not want roommates and that there has been an uptick in single women professionals eager to rent. Ryan Epstein, senior vice president of the Multi-Housing Group at the CBRE Group, notes that many working women prefer to rent instead of buying a house. "Today, no one is doing three bedrooms," concludes Epstein.
What Has Dampened Debt Financing in Apartment Sector?
Digested From "Study: Rising Interest Rates Dampen Debt Financing Conditions in Apartment Sector"
REIT.com (07/31/13) Chappell, Carisa
While the demand for apartments remained strong during the second quarter of 2013, increasing interest rates have put a damper on debt financing conditions. The National Multi-Housing Council's quarterly survey of CEOs and senior executives of apartment-related firms nationwide found that 67 percent of the respondents said the cost of debt financing for apartments has risen since April 2013. Additionally, just 8 percent of respondents said debt financing conditions had improved. "Interest rates have risen 90 basis points since the April survey was conducted, leading two-thirds of the survey respondents to cite worsening debt finance conditions," said Mark Obrinsky, senior vice president for research and chief economist. The apartment sector will likely continue to have strong operating fundamentals. Around 55 percent of the survey's respondents reported tighter rental markets than the previous quarter, reflecting lower vacancy rates and higher rents.
Apartment Market Is Still the 'Belle of the Ball'
Digested From "Apartment Loans Are Belle of the Mortgage Ball, Up 31 Percent"
St. Louis Business Journal (07/30/13) Edwards, Greg
According to the Mortgage Bankers Association (MBA), commercial and multifamily mortgage originations rose 36 percent in the second quarter 2013 from the first quarter and 7 percent on a year-over-year basis. "The apartment market continues to be the belle of the ball, with multifamily mortgage originations running 31 percent ahead of last year’s first half total," states Jamie Woodwell, MBA's vice president of commercial real estate research.
Deals and Transactions
Single-Family Rental Firm's IPO to Test Market
Digested From "Single-Family Rental Firm's IPO to Test Market"
Wall Street Journal (07/31/13) Whelan, Robbie; Demos, Telis
American Homes 4 Rent is expected to price shares of its stock as part of initial offering on the New York Stock Exchange that is looking to raise $750 million. The target's price per share is between $16 and $18, which would place the company's value somewhere in the area of $4 billion. Having more than 19,000 homes owned or controlled, American Homes 4 Rent will become the largest publicly traded company in the single-family rental business, which only started having real growth after the housing-market crash provided a large supply of bargain-prices foreclosures. This will be their IPO from a single-family home-rental REIT, following Silver Bay Realty Trust Corp., and American Residential Properties Inc. It will also be the largest as together those two companies own around 9,000 homes. If successful, American Homes' IPO could show a new way to bet on the recovery of the U.S. housing market. However, the offering comes during a broader hiccup for the REIT market, as stocks have lost some of the gains made in recent years due to rising interest rates. To date, the stock market hasn't been very kind to the other single-family housing owners that went public, which prompted Colony American Homes and Waypoint homes to postpone their plans for doing so. Jim Wilson, head of residential real-estate investment banking at San Francisco-based JMP Securities, commented, "This has got to be the single most high-profile IPO in the sector, and everything else that's priced going forward is going to be priced off of this one."
JLL Gives Four Stars to Lone Star State Apartment Deals
Digested From "Investors Buy $120 Million in North Texas Apartments in Four Separate Deals"
Dallas Morning News (TX) (08/02/13) Brown, Steve
Jones Lang LaSalle (JLL) has brokered the sale of four Dallas-Forth Worth-area apartment communities in deals valued at $120 million. Investor Adams LaSalle purchased the Silverado Apartments, a 332-unit, garden-style community in Frisco, from Sherman Residential. BK Funds purchased the Park Gates at City Place apartments, a 228-unit community in Dallas from The Connor Group. Colonial Properties Trust acquired the newly built Ablon at Frisco Bridges from the Pegasus Ablon. Finally, the 308-unit Republic Park Vista apartment community in Ft. Worth was purchased by Momentum Real Estate Partners. "The Dallas multifamily market continues to see strong demand, rising occupancy levels and effective rental rate growth," said JLL's Jeff Price. "Each of these offerings provided investors the opportunity to purchase well-maintained assets with strong track records."
Oahu Apartment Market Says 'Aloha!' to Healthy Q2 Sales
Digested From "Oahu Multifamily Market Sales Total $34M in Q2"
Pacific Business News (08/01/13) Shimogawa, Duane
Oahu's multifamily housing market continued to register strong sales activity in this year's second quarter, with gains totaling more than $34 million. According to the latest Avalon Quarterly Multi-Family Market Review, the majority of the sales continue to be in the under-$3-million range -- nearly 84 percent of the total transaction volume, in fact. Furthermore, entry-level investors looking to acquire apartment communities between six and 15 rental units ranked as the most aggressive market segment. Compared to the second quarter of 2012, transaction volume climbed 28 percent with the average price per unit for the year increasing slightly to $175,000. The report also noted that as of the end of June, there were a total of 21 active apartment listings and an increase of days on the market to 89 days. Honolulu-based Avalon Development Co. forecasts that the current trend of low inventory, higher price per units and compression of cap rates will continue at least through the end of September. Additionally, it is expected that total transaction volume will remain stable as investors look for areas to place equity.
MAA Posts Increased Q2 Income Ahead of Mega-Merger
Digested From "MAA Posts Increased Income in Second Quarter"
Memphis Business Journal (08/01/13) Ashby, Andy
Memphis-based MAA reported increased income and funds from operations in the second quarter, ahead of its planned merger with Colonial Properties Trust. The apartment-only REIT posted net income of $59.1 million in the April-through-June period, a 109.5 percent increase from $28.2 million in the second quarter of 2012. The figure includes $43.1 million related to gains on the sale of apartment communities and $5.7 million related to merger expenses incurred during the second quarter. "The leasing environment across our markets continues to support solid rent growth and strong occupancy," said Chairman and CEO Eric Bolton. "Steady employment growth and favorable trends driving higher demand for apartment housing across our Sunbelt region supports an outlook for continued solid rent growth despite the uptick in new apartment deliveries." MAA expects to complete its merger with Colonial Properties Trust by September, a move that will make it one of the largest apartment owners and operators in the nation.
Which Buy-to-Rent Players Are Planning Big Financing Push?
Digested From "Blackstone, Deutsche Bank in Talks to Sell Bond Backed by Home Rentals"
Wall Street Journal (07/31/13) Neumann, Jeannette
As of last week, a couple of big-name Wall Street firms are in advanced talks to create and sell the world's first bond backed by home-rental payments. Blackstone Group LP is negotiating to bundle monthly rental payments on between 1,500 and 1,700 of its homes. The bond comprised of the Blackstone residences would be structured and marketed to investors by Deutsche Bank AG. However, some analysts and investors say they are wary of a bond backed by rental payments. They cite the general lack of long-term data on how often residents living in previously foreclosed houses pay their rent on time. In addition, some analysts and investors have raised concerns about how quickly companies have jumped on the bandwagon and bought up thousands of homes. Among the questions they are asking: "Do they have the management track record and expertise to oversee the maintenance of properties scattered nationwide?" Journal sources expect the size of the Blackstone-Deutsche Bank deal to be between $240 million and $275 million.
Three Conditions to Be in Place for Mini-Apartments to Boom
Digested From "Mini-Apartments Are the Next Big Thing in U.S. Cities"
USA Today (07/31/13) Koch, Wendy
Mini apartments are popping up not just in New York City, but also in other major markets where downtowns are booming, rents are rising, and land is finite. More Americans view downsizing their living space as economical and eco-friendly, with many of these rental units spanning only 300 square feet or one-eighth the size of the average new U.S. single-family house. The trend is gaining ground as the share of households nationwide occupied by a single person rose to 27 percent in 2010 from 8 percent in 1940 and 18 percent in 1970. Studies have shown that Millennials, in particular, are drawn to urban living where they can work and socialize. Suffolk University Assistant Law Professor John Infranca says he expects demand for mini apartments to continue, though such developments could be hampered by building codes calling for larger units set decades ago in some areas.
NAA/NMHC Launch Site to Tout Apartments' Economic Impact
Digested From "All About Apartments"
Multi-Housing News (07/13)
National Multi Housing Council (NHMC) Chair Tom Bozzuto said the industry needs to educate both lawmakers and the American public about the apartment sector, which is why NMHC and the National Apartment Association (NAA) have created a joint website about the economic impact of apartments in individual communities. Among the top priorities on the legislative agenda for NMHC and NAA is GSE reform to ensure that apartments are treated differently than single-family houses. Bozzuto notes, "The fact that apartments have been a net positive for the two agencies needs to be recognized." Other agenda items include tax reform to ensure the favorable treatment of carried interest and energy efficiency legislation that involves incentives and not penalties. Over the next 15 years, the two organizations expect demand for apartments to rise given social and demographic changes. While there are $750 billion of new communities in today's pipeline, a slowdown is expected in the next 18 months.
Legal/Legislative Did You Know
N.J. Apartment Owners Eligible for Hurricane Recovery Help
Digested From "Landlords Eligible for Help in Hurricane Recovery"
Press of Atlantic City (New Jersey) (08/03/13) Watson, Sarah
A federal policy shift announced last week may mean New Jersey apartment owners who have already repaired their Hurricane Sandy-damaged communities can be reimbursed with grant money. The current HUD policy allows owners to be reimbursed through certain grant programs that are funded through the $60 billion disaster aid package approved by Congress earlier this year. Prior to the policy shift, apartment owners and homeowners could not be reimbursed via the grant programs if the amount of the damage was worth over half of the pre-storm value of the proeprty. In late July, New Jersey's Department of Community Affairs (DCA) announced that its program for apartment owners to repair their storm-damaged properties, provided those owners met stringent requirements. They included a pledge to rent the units as year-round housing for low- to moderate-income residents in order to increase the amount of affordable housing in the areas most affected by the storm. DCA spokeswoman Lisa Ryan remarks, "Our intention is to start mailing [the first] notification letters in early August." The $70 million program will provide as much as $50,000 per unit to restore, reconstruct, or even elevate apartments. The priority will be apartment communities in the nine most-affected counties, including Cape May and Ocean. Eligible communities must have 25 or fewer apartments, and the DCA will give preference to those properties with seven or fewer rental units, that are in need of mold remediation, and/or housing that caters to those with special needs.
OK Apartment Owners Under Water With Raised Rates
Digested From "Apartment Owners Struggle With Raised Water Rates"
KSWO Channel 7 (OK) (07/31/2013)
A water rate hike in Lawton, Okla., has been in place for a few weeks, but the impact is already hitting apartment owners and managers hard. Most say they knew the increase was coming, but add that they could not have imagined it would be this much. "I've got a $1,200, almost $1,300 increase," said owner Dale Nomura. "It's disconcerting." While the change will not immediately affect residents, apartment communities have started searching for other ways to cover the added costs.
Investment Alert! Last Week to Take Advantage of Discounted Registration to the 2013 Apartment Revenue Management Conference
Don’t delay: Wednesday, August 14 is your last opportunity to save $100 off the price of registration for the 2013 Apartment Revenue Management Conference, September 23-25 at the Turnberry Isle Resort in Miami.
The 2013 Apartment Revenue Management Conference, now in its third year, is the multifamily housing industry’s sole event dedicated to staying ahead of the ever-evolving operational curve and universally recognized as a tremendous value for rental housing professionals. Nowhere else can you find world-class education and first-rate networking, as well as ideas and strategies for boosting net operating income.
In addition to benchmarking and best practices, attendees can look forward to an expanded program focusing on new topics such as ancillary revenue, expense management and business intelligence. Keynote speaker Greg Cross, Senior Vice President of Revenue Management for Hyatt Hotels Corporation, will share current trends in lodging and potential parallels in the multifamily marketplace.
“NOI is Everywhere,” as the conference’s theme promises; but there is only one place to learn all about it. Register before it’s too late!
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 ConnectM, yes, then you’re missing tons of valuable collaboration to boost your career.
Learn all about Connect including different ways to make this members-only tool work for you. If you need a little extra help, check out our series of short video tutorials to see how you can join a community, join a conversation, start a new discussion or share a document.
Don’t miss all of the great ideas and discussion in NAA Connect. Get started today.
Find the Perfect Online Learning Opportunity in Webinar Wednesdays
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!
NEW! Individual 'REWIND' Education Sessions Available
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
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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