Single Family Rentals Now Exceed Multifamily, CoreLogic Reports

 

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Single Family Rentals Now Exceed Multifamily, CoreLogic Reports

Industry News
U.S. Homeownership Rate at 15-Year Low
AvalonBay Q1 2012 Profit Nearly Doubles on Higher Rental Rates
Manhattan Apartment Building Prices at Peak as Rents Jump
Equity Residential FFO Climbs on Surging U.S. Apartment Demand
Park & Market Apartments Deal Indicative of Hot Triangle Market
Detroit Initiative to Mix Apartments, Retail, and Offices
Middle Tennessee Rent Rising With Demand for Apartments
Thousands of Aging Vancouver Apartments at Risk
Irvine Co. Adds First New Apartments in OC Since Recession
Apartment Rents in Manhattan at All-Time High

Legislative/Legal News
Half of San Antonio Apartments Flunking New Fire Inspection
Recycling Efforts Expand to Apartments in Ventura County (CA)
Apartment Owner Questions Proposed New Carrollton (Md.) Tax
Supreme Court Will Not Hear Suit Challenging Rent Stabilization Law

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Single Family Rentals Now Exceed Multifamily, CoreLogic Reports
Digested From "Single Family Rentals Now Exceed Multifamily"
United Press International (04/23/12) by Steve Cook

Despite the dwindling supply of homes for sale, multiple listing services are filling the void with rental listings for single-family properties that were previously foreclosures. According to a new study by CoreLogic economist Sam Khater, the single-family rental market now makes up 52 percent of the residential rental market as a whole and accounts for 21 million rental units. Khater said rents for single-family houses typically run 1.5 to 1.6 times higher than multifamily housing rentals. Additionally, demand is strong. Families are more likely to seek a single-family rental than an apartment. Khater said the typical single-family rental household is a family that has just left a foreclosure and can afford to pay the rent on a former foreclosure, but could not make the mortgage payment on their old home. According to Census data, a definite correlation has emerged between increased single-family rental housing and the hardest-hit foreclosure areas in the country.
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U.S. Homeownership Rate at 15-Year Low
Digested From "U.S. Homeownership Rate at 15-Year Low"
Los Angeles Times (05/01/12) by Tiffany Hsu; Alejandro Lazo

U.S. homeownership fell to 65.4 percent in the first quarter, its lowest point 15 years, reports the Census Bureau. The rate is down from 66 percent in the fourth quarter of 2011, 66.4 percent in the first quarter of last year, and a high of 69.2 percent in 2004 before the housing bubble popped. Homeownership among Americans aged 35 and younger has declined to the lowest level since 1994, and the rates for blacks (43.1 percent) and Hispanics (46.3 percent) are at the lowest they have been in years.
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AvalonBay Q1 2012 Profit Nearly Doubles on Higher Rental Rates
Digested From "AvalonBay 1Q Profit Nearly Doubles on Higher Rental Rates"
Fox Business (04/25/12)

AvalonBay Communities Inc.'s first-quarter earnings increased 90 percent as the apartment REIT benefited from higher rents and fewer vacancies. AvalonBay recorded a profit of $57.8 million, or 60 cents a share, up from $30.3 million, or 35 cents a share, a year earlier. Funds from operations finished the quarter at $1.28 a share from $1.08 a share in the first quarter of 2011. Revenue increased 7.9 percent to $254.5 million. AvalonBay forecast current-quarter earnings of $1.86 to $1.90 a share, including 56 cents in net charges, and FFO of $1.30 to $1.34. The company has grown more upbeat about future business, saying recent demographic trends for renting were stoking better-than-expected portfolio trends. Multifamily housing REITs have seen results improve lately as renting remains attractive amid continued economic uncertainty, leading to fewer vacancies and higher rents. AvalonBay is shifting from its current strategy of developing upscale apartment complexes into three distinct brands that will include upscale units, moderately priced units aimed at suburbanites, and a segment geared to younger renters in urban areas.
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Manhattan Apartment Building Prices at Peak as Rents Jump
Digested From "Manhattan Apartment Building Prices at Peak as Rents Jump"
Bloomberg (04/27/12) by Oshrat Carmiel

Competition for Manhattan apartment buildings has resulted in record high prices as rental demand soars, reducing yields on the properties to the lowest in more than six years. According to Real Capital Analytics, the capitalization rate averaged 4.4 percent for the city's multifamily housing in the first quarter of the year -- the lowest since the third quarter of 2005. "There is still plenty of room to run on rents, and I see absolutely no reason why this action will or should stop anytime soon," said Doug Harmon, senior managing director at Eastdil Secured LLC, who brokered deals for six apartment communities citywide in the past 13 months. Tenant demand for Manhattan apartments lifted the median rent in the first quarter up 7.1 percent from a year ago to $3,100 a month. New leases have jumped by 14 percent.
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Equity Residential FFO Climbs on Surging U.S. Apartment Demand
Digested From "Equity Residential FFO Climbs on Surging U.S. Apartment Demand"
Bloomberg (04/25/12)

Equity Residential, the largest publicly traded U.S. apartment owner, reported first-quarter funds from operations increased to $188.3 million as the nation's rents increased amid surging tenant demand. That figure is up from $173.5 million reported for the same period in 2011. An improving job market and stricter mortgage-lending standards that impede homebuying are fueling demand for apartments nationally, allowing apartment owners to increase rents. Multifamily owners' rental revenue are expected to increase 6.3 percent in 2012, according to Axiometrics Inc, which notes that apartment REITs have pushed rents up 2.8 percent this year. "While there is much discussion of a housing recovery, we believe the catastrophic housing downturn the country experienced has profoundly changed the way potential homebuyers view housing," Alexander Goldfarb, an analyst with Sandler O'Neill & Partners LP, wrote in an April 16 note.
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Park & Market Apartments Deal Indicative of Hot Triangle Market
Digested From "Park & Market Apartments at North Hills Sold for $82 Million"
Raleigh News & Observer (NC) (04/25/12) by David Bracken

The Park & Market apartments in the Raleigh-Durham-Chapel Hill area of North Carolina have sold for a record-breaking $82 million, indicating investors' faith in the area's apartment market. The buyer is Crow Holdings of Dallas, which paid Kane Realty $200,489 per unit -- far above the previous record for the Triangle area of $180,000 per unit last year for Oberlin Court apartments in West Raleigh. Investors are increasingly turning to apartments locally for a strong return in a low interest rate environment, and developers are eager to break ground on new apartment communities. With a growing population and constant stream of university graduates in the area, the Triangle is a prime place for investment. So far this year, there have been $342 million in apartment deals, and last year's total topped $966 million.
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Detroit Initiative to Mix Apartments, Retail, and Offices
Digested From "Path Clear for Building Revival at Capitol Park"
Detroit News (04/26/12) by Louis Aguilar

Detroit's Downtown Development Authority has approved a plan for Karp and Associates to renovate three publicly owned, empty buildings in the city's Capital Park area. While the project is expected to take about three years to complete, it will result in 204 loft-style apartments and 45,000 square feet of retail and office space. Detroit Mayor David Bing states, "The new apartments will address our shortage of housing there, and the retail and office space will continue the great momentum we have establishing Detroit as a great place to live, work, and play."
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Middle Tennessee Rent Rising With Demand for Apartments
Digested From "Middle Tennessee Rent Rising With Demand for Apartments"
Tennessean (04/24/12) by Bobby Allyn

A recent report by the Greater Nashville Apartment Association found that Middle Tennessee's apartment occupancy rate was almost 95 percent in the first three months of 2012, up two percentage points from the same period last year. The report highlights the region's rental market as stronger due to an increase in average monthly rents. The biggest increase was seen on Charlotte Avenue where a monthly rental rate of $696 represents a 15 percent jump over last year. The second highest year-over-year rental hike came in the more expensive West End-downtown market, where average rents increased by 4.3 percent to $1,286. Experts say the rents will keep rising until more units become available, due to high demand in the region. But local apartment construction appears to be responding to the ballooning demand for rental units. At the end of last month, there were approximately 3,700 apartment units under construction, more than double the amount being build during the same time period last year.
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Thousands of Aging Vancouver Apartments at Risk
Digested From "Thousands of Aging Rental Apartments at Risk: Study"
Maple Ridge News (Canada) (04/23/12) by Jeff Nagel

A new study warns that thousands of rental apartments in older suburban communities throughout Metro Vancouver are increasingly in danger of being torn down. The report said 13 percent of apartments built before 1980 are already at moderate to high risk of loss to redevelopment. Additionally, the number of at-risk apartments outside of the city proper could climb to 30 percent within the next decade, according to the research. The report cited White Rock and North Vancouver District as the markets with the most to lose. Together, they could lose as many as 1,840 rental units. The analysis rated units at risk if the value of the land for redevelopment exceeds the current value based on the stream of rental income.
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Irvine Co. Adds First New Apartments in OC Since Recession
Digested From "Irvine Co. Opens First New Apartment Communities in OC Since Recession"
OC Metro (04/20/12) by Steve Churm

The Irvine Co. has opened four new apartment communities that will add 1,677 units to the Orange County, Calif., market. Irvine Co. cites the increasing demand for rental units countywide as the driving force in this new expansion. "The rental demand has been strong and building for the past two years, and we believe it will continue for at least another 12 to 18 months," says Kevin Baldridge, executive vice president of Irvine Company Apartment Communities. Monthly rental rates for the four communities range from $1,478 to $2,791. Each offers upgraded common area amenities.
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Apartment Rents in Manhattan at All-Time High
Digested From "The City of Sky-High Rent"
New York Times (04/22/12) by Marc Santora

Average rent prices in Manhattan have hit an all-time high of $3,418 a month, according to Citi Habitats. In the past when rents jumped quickly it was at a time of strong economy and low unemployment, but in the current weak economic climate the skyrocketing rent prices are unrelated to economic factors. The main driver is a tight credit market that limits new construction and forces people to stay renters rather than buy. This is fueling renter discontent, and many people feel trapped. One tenant whose rent recently jumped said it was too expensive to stay or leave, and that she feels "like I am not even a person to the landlord." Some prospective renters are turning to buying, but more are gritting their teeth and staying, taking on more roommates or moving to outer boroughs where rent prices are rising as well. With a vacancy rate of around 1 percent, residents do not have much negotiating power. The last rent bubble only popped after the financial crisis in 2008, and owners and managers were offering incentives to attract apartment residents through 2010. But unless another meltdown occurs, supply and demand will be the drivers of rent in Manhattan with little relief on the horizon.
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Legislative/Legal News


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Half of San Antonio Apartments Flunking New Fire Inspection
Digested From "Half of San Antonio Apartments Flunking New Fire Inspection"
WOAI.com (San Antonio) (04/25/12) by Jaie Avila

A News 4 WOAI Trouble Shooters investigation found that only about half of the apartments in San Antonio inspected by the fire department have the required number of smoke detectors. For the first time, the fire department began inspecting all apartment communities in the city earlier this year. The fire department has completed more than 600 inspections, but 49 percent of the facilities failed. "We were hoping to see better compliance. We have had some complexes claim they just weren't aware of the requirement," said Christopher Monestier, Division Chief and Deputy Fire Marshall. However, the ordinance was passed in 2010, giving apartment communities two full years to install a smoke alarm in every sleeping area, and right outside each bedroom door as well. Facilities that fail the inspections have two weeks to comply with the ordinance or pay a fine of up to $2,000.
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Recycling Efforts Expand to Apartments in Ventura County (CA)
Digested From "Recycling Efforts Expand to Apartments and Businesses in Unincorporated County Under New Law"
Ventura County Star (CA) (04/24/12) by Kathleen Wilson

In California, the Ventura County Board of Supervisors adopted an ordinance requiring owners of apartment communities and commercial businesses in the county to recycle in order to comply with a state law to reduce waste from California's landfills. Under the state law, local municipalities must ensure recycling efforts at commercial facilities and apartment communities with at least five units beginning on July 1. State officials are expected to share strategies with lawmakers by 2014 to meet the state's goal of a 75 percent reduction. But Bruce Belluschi, who oversees waste diversion program for the unincorporated territory, said the effect on the county should be minimal because most of those in the area are already involved in recycling efforts.
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Apartment Owner Questions Proposed New Carrollton (Md.) Tax
Digested From "Apartment Owner Questions Use of Proposed New Carrollton Safety Tax"
Gazette.Net (MD) (04/19/12)

Officials in New Carrolton, Md., is proposing a public safety tax that would be assessed on apartment communities and shopping centers. Some apartment companies are protesting. The proposed law is based on police data indicating that about 70 percent of police calls come from apartments and retail centers. It would tax apartment owners 15 cents per $100 of real property assessed value and 15 cents per $100 of personal property assessed value. Ronald Frank, president of Southern Management Corp., laments that his company would have to pay $46,000 next year under the new tax. He and others are concerned the money will not go toward adding police service to apartments and will instead be placed in the city's general fund. He states, "I'm in favor of the concept, but when I spend $46,000, I’m looking for $46,000 in value." To this end, he would like to be able to monitor how the money is spent. The city has said it may send Frank and others activity reports to show whether the tax money is helping to reduce crime. About 1,600 apartments would be affected by the new tax.
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Supreme Court Will Not Hear Suit Challenging Rent Stabilization Law
Digested From "U.S. Supreme Court Declines to Hear Suit Challenging the Rent Stabilization Law"
New York Times (04/24/12) by Adam Liptak

The U.S. Supreme Court last week refused to hear a challenge to New York City's rent control law. In doing so, the Second Circuit's 2011 decision to dismiss the case has been affirmed. That suit was brought by James and Jeanne Harmon, owners of an apartment building that is partially subjected to the city's rent stabilization measures. They claim the city's rent control law unconstitutionally deprives them of their property without just compensation. They are legally required to rent the apartments at a rate about 60 percent below market value. The suit did not directly challenge the rent control law, an older system that applies to far fewer tenants. The Harmons said that requiring them to accept below-market rents amounted to an unconstitutional taking of their property. "We still believe that the Constitution does not allow the government to force us to take strangers into our home at our expense for life," James Harmon said after the court turned down the case. "Even our grandchildren have been barred from living with us. That is not our America."
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May 1, 2012

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