NAA Industry Insider: Apartment Market Tightens as Housing Costs Jump

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TWCFEB13
Apartment Market Tightens as Housing Costs Jump
Digested From "Apartment Market Tightens as Housing Costs Jump"
Wall Street Journal (10/01/13) Wotapka, Dawn

Rising home-buying costs have helped to boost demand for apartments and have enabled apartment owners to increase rents significantly this summer. The average monthly rent in the third quarter rose 1 percent to $1,073 from the prior quarter, and is the largest quarterly gain in a year, according to a new report from Reis. Compared with the third quarter a year ago, the average monthly rent is up 3 percent. Reis tracks 79 markets, and none recorded a decline in rents. The rental increases beat the forecasts of industry watchers. Some observers expect rent increases to slow due to the pace of growth in recent years as well as a flood of new supply on the horizon. The national vacancy rate fell to 4.2 percent from 4.3 percent in the prior quarter and 4.7 percent a year ago. With few apartments available, the concessions—from free rent to gift cards—seen after the financial crisis are rare. Brokers say they are urging would-be renters to make decisions quickly, have their checkbooks and other documents on hand and to at least offer the asking rent. "It's not worth haggling over a few bucks," says T.J. Rubin, managing broker of Fulton Grace Realty in Chicago. "We've had people lose out because they've hesitated and we've had people lose out because there are multiple offers."
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Market Trend Insights


RealPageMay13
Americans Are Still Moving Way Less Than They Used To
Digested From "Americans Are Still Moving Way Less Than They Used To"
Atlantic Cities (09/27/13) Kolko, Jed

Studies have shown that the percentage of Americans moving each year has dropped from 20 percent during the 1950s and '60s to about 14 percent before and during the 2000s housing bubble, then to a low of 11.6 percent in 2011. The decrease in mobility means that Americans are staying in the same house longer between moves -- from five years, on average, in the '50s and '60s to 8.6 years in 2013. The Census did report an increase in mobility during 2012 to 12.0 percent. The latest 2013 data, though, suggests that the rebound might have been short-lived having dropped back down to 11.7 percent.
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Southern California Has the Sunshine ... and the Rising Rents
Digested From "Forecast Sees Residential Rents Climbing"
Los Angeles Business Journal (09/24/13)

Last week saw the release of the latest USC Casden Multifamily Forecast report, which predicts that monthly rents will continue to rise for at least two more years in Southern California despite new construction. According to USC Lusk Center for Real Estate Director Richard Green, the region's market is being fueled by rising home prices. He states, "Despite marked improvements in employment and the economy, the rapid increase in home prices and interest rates are pricing first-time home buyers out of the local market." Researchers tracked four total areas -- the Inland Empire and Los Angeles, Orange, and San Diego counties. In the year ended June 30, nearly 6,700 new rental units were erected. Across L.A. County, monthly rents rose 2.9 percent to an average of $1,435. Among the four areas, only Orange County has a higher average monthly rent at $1,572. The study further shows that Santa Monica was the submarket with the highest rent in the region at $2,328 a month. On the flipside, Victorville in San Bernardino County had the lowest rent at $755. In other findings, San Diego County registered the lowest apartment vacancy rate at 2.3 percent.
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Thurston County (Wash.) Residents Thirsty for Apartments
Digested From "County Vacancy Rates on Decline"
The Olympian (Olympia, Washington) (09/24/2013) Boone, Rolf

In Washington state, new rental data released by Dupre + Scott Apartment Advisors of Seattle shows that Thurston County apartment vacancy rates have tightened to 4.2 percent. Meanwhile, average monthly rents have jumped more than $20. Year over year, vacancy rates have fallen from 6.1 percent to 4.2 percent, while average rents rose from $844 a month to $867. Analysts say the improved state of the single-family housing market has stimulated apartment demand, with a number of people having been priced out of homeownership opportunities. The fall months also mark the start of the school year for college students moving into the Thurston area.
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Why Does Buying Beat Renting in America's Biggest Cities?
Digested From "Buying A Home Still Beats Renting By 35 Percent in America's Biggest Cities"
Forbes (09/20/13) Brennan, Morgan

It is still cheaper to buy than rent in many of the biggest U.S. cities, despite rising home prices and mortgage rates. A new Trulia study finds that, nationally, it is 35 percent cheaper to own a home. Even in notoriously renter-heavy cities like New York and San Francisco, it is still 21 percent and 9 percent more affordable, respectively, to own. Trulia chief economist Jed Kolko comments, "Recent mortgage rate and home price increases have made buying significantly more expensive than last year, but not enough to tip the math in favor of renting. This is because rates remain well below historical norms, and prices are still slightly undervalued, too." Mortgage interest would have to hit double-digit levels before the tide would turn in most markets, he notes. Nonetheless, Kolko concedes, the gap between owning and renting is narrowing. Nationwide, it was 45 percent more affordable to buy than to rent a year ago. Of the 100 biggest metropolitan areas that Trulia tracked, all but one -- Springfield, Mass. -- saw the cost of homeownership move closer toward the cost of renting.
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Keeping Rising Houston Rents in the Loop
Digested From "Renters Feel Pressure as Developers Tear Down Apartments to Build High-End"
Houston Chronicle (09/26/13) Sarnoff, Nancy

Property professionals note that an unusual trend has emerged in Houston's multifamily housing sector. Developers are demolishing older apartment communities to make way for high-end communities where they can charge higher monthly rents. As rent continues to creep up in the city's popular Inner Loop areas, many residents have been or will be displaced as developers take advantage of pent-up demand and a general shortage of rental units. Houston Chronicle readers go on to share their experiences with the changing landscape of the Inner Loop's apartment stock. Among the most sensible was local resident Brandon Wallace, who wrote: "Hopefully we can promote density and feasible mass-transit to combat the woes of this and support the benefits."
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Utah County Has Tight Apartment Vacancy Rate
Digested From "Salt Lake County Has 'Tight' Apartment Vacancy Rate, Report Says"
Deseret News (UT) (09/23/13) Lee, Jasen

A Cushman & Wakefield Commerce study shows that the apartment vacancy rate in Utah's Salt Lake County is currently 3.9 percent versus a rate of 3.8 percent a year ago. However, rental rates climbed 4.4 percent over the last year with the combined average monthly rental rate for all types of apartments rising to $850. Researchers surveyed rental and vacancy information on mid-size to large apartment communities countywide, including approximately 370 apartment communities ranging from 25 units to 588 units. The market remains very "tight" despite the construction of new rental units, observes Kip Paul, executive director of investment sales for Cushman & Wakefield Commerce. He added that vacancy rates for studio, one-, and two-bedroom and one-bath apartments declined over the last year. Meanwhile, vacancy rates for two-bedroom, two-bath and three-bedroom units rose slightly. Paul concluded, "The Salt Lake City apartment market is growing stronger each year and vacancy rates continue to remain low year over year. Market conditions for property owners will continue to be favorable over the next year, although vacancy rates may see a slight rise due to the completion of several new apartment communities over the year." He went on to predict that vacancy rates will stay under 5 percent, while a slight uptick will likely occur with the completion and lease-up of several new apartment communities. There appears to be little threat to overbuilding as the Salt Lake County market has managed to easily absorb 5,300 units constructed in the last three years.
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Deals and Transactions


LowesAug2013
What REIT Made Last Week's Big Apartment Portfolio Buy?
Digested From "Associated Estates to Buy 1,600-Unit Apartment Portfolio for $324M"
Commercial Property Executive (09/25/13) Murray, Barbra

Associated Estates Realty Corp. has agreed to add more than 1,600 apartments to its portfolio, having entered into a definitive agreement with Northwood Ravin LLC to acquire a portfolio of seven existing and under-development communities in three Mid-Atlantic and Southeast states. The total purchase is $324 million. Associated Estates' portfolio currently consists of 51 multifamily housing assets containing 13,171 rental units in 10 states. With five of the seven soon-to-be-added properties located in North Carolina, the REIT will almost triple its presence in the state. Associated Estates' acquisition will also include apartment communities in Atlanta and Tampa, both of which are currently under construction.
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Bozzuto Hopes Buyers Will Vote for Its Suburban D.C. Apts
Digested From "Bozzuto Group Seeks to Shed Suburban Maryland Apartment Portfolio"
Washington Business Journal (09/24/13) Sernovitz, Daniel J.

Affiliates of The Bozzuto Group have retained Transwestern to market a portfolio of apartment communities in Prince George's County, Md., to interested buyers. The move comes nearly seven years after Bozzuto acquired the apartments in a joint venture with Fannie Mae for $98 million. Developer Stephen A. Goldberg Cos. was the seller at the time. The communities have since undergone nearly $12.5 million in renovations. Offers will be due by the end of next month. The portfolio consists of nearly 1,200 rental apartments in such Washington, D.C., suburbs as Suitland and Temple Hills. The various communities will be marketed for sale individually or as a portfolio. The offering presents the chance for a buyer to "pick up a critical mass of properties in a concentrated area," according to the Journal.
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Industry Buzz


National Exemption Service Inc.
Why Homeownership Is the Greatest Lie Ever Sold
Digested From "Why This American Myth Is the Greatest Lie Ever Sold"
Denver Post (09/26/13) Fairley, Juliette

According to the National Multi Housing Council, about 32 percent of the overall population live in apartments versus 67 percent who own their home. Patrick Bet-David, author of "Doing the Impossible," is among those who are critical of how the general public has been led to believe that homeownership should be the end-game goal for most people. He states, "The real estate industry has done a great job of persuading us that the American dream starts with homeownership -- it's the greatest lie ever sold. Hundreds of thousands of families are going through the pain and struggle of trying to not miss their next mortgage payment simply, because they purchased a home prematurely." He and other experts list five upsides to renting. First, there are fewer out of pocket expenses when signing a lease agreement. Second, typically, the apartment owner is responsible for all maintenance and repairs. Third, there is the issue of greater mobility. Relocating is much more possible for those with minimal ties for a limited stay in one particular area. Fourth, a less than stellar credit score still enables you to obtain rental housing in many cases. Finally, lower monthly expenses open up a lot more of life's possibilities. Bet-David concludes, "Most people would be so much better off taking the money they put into a home and starting a business. Self-employment is one of the fastest ways to acquire substantial amounts of wealth, and it's with this abundance of cash that you can then truly enjoy homeownership."
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Colonial Properties Shareholders OK Merger with MAA
Digested From "Colonial Properties Trust Shareholders Approve Merger with Mid-America Apartment Communities, Inc."
MarketWatch (09/27/13)

Late last week, Colonial Properties Trust shareholders voted overwhelmingly to approve the proposed merger with Mid-America Apartment Communities (MAA). Nearly 97 percent of the votes cast at a special meeting of shareholders were in favor of adopting the merger agreement. The merger is now expected to officially close on Oct. 1. As a result of the merger, each Colonial common share will be converted into 0.360 of a newly issued share of MAA common stock. As of the end of this year's second quarter, Colonial Properties Trust had ownership stakes in 115 apartment communities containing 34,577 rental units and another 1.2 million square feet of commercial space.
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What Are the Dangers of Late-Afternoon Earnings Calls?
Digested From "The Dangers of Late-Afternoon Earnings Calls"
Harvard Business Review (10/01/13) Chen, Jing; Demers, Elizabeth; Lev, Baruch

Conference calls remain an important channel of communication between corporate managers and outside stakeholders. They are a quarterly ritual at most public companies, consisting of prepared remarks from executives followed by a round of questions and answers. The publication used textual analysis software to examine various call transcripts to see whether and how tone varies with time of day, in addition to the consequences of any differences. Prior research has shown that physical and mental fatigue cause irritability and a decline in executive function, particularly just prior to lunch and late in the afternoon. Harvard Business Review analyzed the earnings calls of 2,113 publicly held U.S. firms based in the Eastern and Central time zones from January 2001 to the end of 2007's second quarter -- more than 26,500 calls. Researchers used linguistic algorithms to measure positivity, negativity, and uncertainty during the Q&A portion of each call. Tone grew more negative as the morning progressed and improved slightly at midday, presumably because participants recharged at lunch. Negativity increased during the afternoon, then fell off after the market's closing bell. "Overall," the report states, "calls originating late in the afternoon were more negative, irritable, and combative than calls made early in the morning, even after controlling for factors such as industry norms, financial distress, growth opportunities, and the news that companies were reporting."
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Look Who Just Got Bumped Up to the S&P MidCap 400 Index
Digested From "Mid-America Apartment Joins S&P MidCap 400 Index"
MSN Money (09/25/13)

Mid-America Apartment Communities Inc. is moving up to the S&P MidCap 400 Index. The multifamily REIT is set to replace Monster Worldwide Inc., which will take Mid-America's place in the S&P SmallCap 600. The change will take place at the close of trading Tuesday, Oct. 1.
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Legal/Legislative Did You Know


2013 Diamond Sponsors with correct Azuma logo
Austin Council Wrangles New Rental Registration Plan
Digested From "Austin Council Passes One of Two Rental Registration Plans"
Austin American-Statesman (09/27/13) Coppola, Sarah

In Texas, the Austin City Council unanimously approved a proposal this past week to require apartment communities and other rental properties to register with the city and be inspected regularly. According to council members, the goal is to better track and impose penalties on those properties with unsafe or unsanitary conditions. The plan, which was crafted by Council Member Bill Spelman, will require both multifamily and single-family rental properties that are cited for several health and safety code violations in one year to register with the city and be inspected periodically. The Austin Apartment Association was among the groups that backed Spelman's plan. The city currently requires only short-term rental homes -- a small segment of rental properties -- to register. Furthermore, inspections and enforcement of safety codes, such as an apartment community's structural stability, are only done after residents lodge complaints with the city.
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The Five New Building Resiliency Laws on the Books in NYC
Digested From "NYC Enacts 5 Building Resiliency Laws Recommended by Urban Green Council"
Paramus Post (NJ) (09/24/13) Fabrikant, Mel

On Sept. 24, the New York City Council enacted the first set of new laws designed to help improve the resilience of the city's buildings and infrastructure in the face of future severe weather events similar to Superstorm Sandy. The laws being enacted implement five specific recommendations of the city's Building Resiliency Board which is led by the Urban Green Council. Among the specific measures are a requirement that new automatic faucets and toilets have at least two weeks of battery backup so that they can remain operation in the event of power failures, and a requirement that new buildings built in flood zones be equipped with valves to prevent sewage from backing up into the building. The new laws also call for the creation of a manual outline construction requirements in flood zones, commission studies on the effects of hurricane winds on existing buildings, and pilot programs testing the use of new road and sidewalk materials that will be able to absorb water and help prevent flooding. These laws amount to 20 percent of the legislative recommendations made by the Building Resiliency Council, though more of the recommendations are expected to become law later in the year.
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NAA Announcements


Save $300 by Registering Now for the 2014 NAA Student Housing Conference

Plan to learn everything there is to know about housing the next generation March 3-5, 2014, as NAA convenes the 2014 NAA Student Housing Conference & Exposition in Las Vegas at the ARIA Resort.

And, for a limited time, save $300 on the cost of registration (groups of five or more can receive even greater savings!)

Join more than 900 star pupils for two days chock-full of education and networking opportunities, from general and breakout sessions led by recognized experts in the student housing business, to reception and time spent interacting with exhibitors on the trade show floor. Position yourself at the top of this expanding sector of rental housing and better understand the next generation of residents—how they communicate, where to find them and what amenities will bring them to your community and keep them happy.

Visit the Student Housing Conference website for registration, schedule and the latest announcements. Breathe easy—no admissions essay required!

And don’t forget to use the official hashtag #NAAStudentConf to engage, discuss and follow the exciting news from this conference.
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Interested in Educating Your Peers? The 2014 NAA Education Conference & Exposition Is Seeking Your Presentation

Convinced you have a fantastic session idea for the 2014 NAA Education Conference & Exposition? Don’t keep it to yourself! The online Call for Presentations for the 2014 NAA Education Conference, June 18-21, 2014 in Denver, is now open for education session submissions.

A few notes: Education session proposal submissions are limited to four per individual and/or company (including subsidiaries); no paper documents accepted; you will be required to submit all requested information, and incomplete submissions will not be accepted or reviewed; and the deadline to submit is Oct. 18, 2013.
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2013 NAA Survey of Income & Expenses Data Now Available

The 2013 NAA Survey of Income & Expenses is now available. The survey includes an executive summary, detailed data, reports and charts about rental communities.
A total of 4,526 properties containing 1,138,056 units are represented in this year's report. Data was reported for 4,117 market rent properties containing 1,077,468 units and 409 subsidized properties containing 60,588 units. The executive summary appeared in the Sept. issue of units magazine. To order, please visit the NAA Store.
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"CAMnesty" Gives CAM Students a Second Chance

CAMnesty is a new program that offers individuals who have started but may not have completed their Certified Apartment Manager (CAM) designation the opportunity to pick up where they left off and earn the CAM designation. Learn more about the CAMnesty program.
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NAAEI Designation Courses Offered Near You!

CAM:

Roanoke Valley Apartment Association
November, 2013

CAM Online

CAMT:

Hampton Roads Apartment Council
October - December, 2013

Apartment Association of Greater Los Angeles
November - December, 2013

CAS:

Roanoke Valley Apartment Association
November, 2013

NALP Online

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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October 1, 2013

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