U.S. Rent Hikes Slow, New Report Shows
Digested From "Rent Rises Showing Signs of Cooling Off"
Wall Street Journal (04/03/13) P. A7 Wotapka, Dawn
Reis Inc. reports a drop in the national apartment vacancy rate from 4.5 percent in the fourth quarter of 2012 to 4.3 percent in the first quarter of 2013. Meanwhile, the national average monthly rent was $1,054, rising 0.5 percent from the fourth quarter and 3.4 percent year-over-year but amounting to the slowest growth rate since late 2011. Nationwide, there are concerns about overbuilding. Luis Mejia, director of multifamily research for the CoStar Group, notes that 150,000 new rental units will be built in 2013 and another 300,000 combined in 2014 and 2015 in the 54 biggest metropolitan markets. Last year in Chicago, a dearth of apartments enabled some owners and managers to hike monthly rents by as much as 20 percent from the previous year. But with hundreds of new apartments being delivered each month, Luxury Living Chicago Realty owner Aaron Galvin says he hasn't seen a rent rise above 5 percent this year. He remarks "We're seeing a shift in Chicago because we're finally getting some supply." Meanwhile, the District of Columbia was the only one of the 79 markets Reis tracks to see rents decline in the fourth quarter. Long Island, N.Y., came in flat from the previous three months, while its vacancy rate ticked up. Vacancies increased the most -- 0.4 percent -- in Little Rock, Ark.
Market Trend Insights
Oil-Boom Byproduct: Unaffordable Housing
Digested From "Oil-Boom Byproduct: Unaffordable Housing"
Wall Street Journal (04/05/13) Hudson, Kris
North Dakota towns are benefiting from millions of barrels per year of oil shale as tens of thousands of newcomers, thousands of new jobs, and new tax revenues come with the boom. However, the development has also resulted in soaring real-estate prices. Listing prices for the few available homes in the region have increased by nearly 27 percent in the past year to an average of $253,000, and some rentals have gone up even more. For example, a one-bedroom apartment in Williston, N.D., that rented for several hundred dollars a month before the boom now goes for $2,000. State residents in such traditionally moderate-income jobs as police dispatchers, teachers, and municipal workers earn too little to keep up when it comes to paying for homes and apartments. As a result, North Dakota towns are dealing with challenges commonly faced by economically vibrant areas like San Francisco and New York in determining how to create affordable "workforce housing" for service-sector employees. North Dakota's Legislative Assembly is considering legislation to boost the state's Housing Incentive Fund for financing affordable housing to $50 million from $15 million. The measure also would enable the state to raise income limits for residents in subsidized housing. The state's Housing Finance Agency predicts the $50 million allotment, if approved, will help finance construction of 2,500 affordable-housing units in the next two years, a figure that still falls well short of its forecast that the state will need 7,300 new affordable units in that time frame.
Where Investing in Rental Homes Is Most Profitable
Digested From "Where Investing in Rental Homes Is Most Profitable"
Wall Street Journal (04/04/13) Whelan, Robbie
According to RealtyTrac, the top five most profitable markets for landlords to rent out single-family homes are Memphis, Tenn.; Saginaw, Mich.; Toledo, Ohio; Ocala, Fla.; and Las Vegas. The company ranked the cities by calculating cash purchase capitalization rates -- or how much net cash flow an investor can wring out of a property each year after paying cash to purchase it. According to RealtyTrac's Daren Blomquist, the formula helps individual investors who are buying one or a few homes at a time, rather than large institutional speculators who snap up hundreds of discounted homes in the same market all at once. "We created this [report] with our customers in mind -- the mom-and-pop, individual investors," he notes. "The folks I've talked to who are acquiring these in bulk or in larger quantities are saying that because foreclosures are starting to dry up, more and more they're buying homes of the MLS [multiple listing service.]" While just a handful of areas traditionally favored by the large-scale rental investors also show up on RealtyTrac's top 20 list, the real surprise is the absence of any markets in California. Blomquist explains that prices in the state have climbed so much, due to high investor interest in the past couple of years, that it is difficult to make a profit from renting homes there.
Housing Crisis? It Ain't Over 'Til Americans Say It's Over
Digested From "Most Americans Say Housing Crisis Isn't Over, Survey Finds"
Los Angeles Times (04/04/13) Reckard, E. Scott
Based on a new survey commissioned by the MacArthur Foundation, the housing bust has spawned great skepticism about the traditional connection between homeownership and the American dream. Titled "How Housing Matters," the study notes that more than 75 percent of Americans believe the country remains mired in the housing crisis or that the worst is still ahead. In terms of remedies, roughly 66 percent believe national policy should be to encourage renting and homeownership equally. The telephone poll of 1,433 adults, conducted between Feb. 27 and March 10, found that more than seven in 10 renters hope to own a home someday. However, a solid majority also believe that renters can be just as successful as owners in achieving the American dream. Peter D. Hart of Peter D. Hart Research Associates, which conducted the survey, concluded, "Many of the positive attributes that have long been associated with homeownership are fading."
Who's on the Move and Why?
Digested From "More Americans Moving More, Longer Distances"
USA Today (04/03/13) Schmit, Julie
The number of U.S. households that pulled up stakes in January and February rose 5.4 percent from a year ago, reports the American Moving & Storage Association. For the same two months of 2012, household moves were up 2.9 percent from the previous year. The average American moves six times in their adult life, according to survey data from the moving company Mayflower. But the new survey revealed that families have been putting off relocating because of economic instability and home price depreciation. Nearly a third of the 1,020 respondents said they would consider moving in the next year, with Millennials (between the ages of 18 and 34) leading the way at about half. The most common reasons cited for moving in the next year were the desire to live in a new or better home or a more desirable neighborhood.
Why Is Multifamily No Longer the Darling of the REIT Sector?
Digested From "REIT Returns Up but Trail Broader Market"
Wall Street Journal (04/03/13) Pruitt, A.D.
From January through March, REITs enjoyed their best quarter since the first three months of 2012. However, companies that own apartment communities sputtered. Multifamily REITs had been the darling of the sector for several years. As a group, they declined 0.03 percent in the first three months of this year -- a decline that reflected investor concern that the improving single-family home market might result in higher vacancies and lower rents at rental apartments. Joel Beam, fund manager for Forward Select Income Fund, states, "The thinking has shifted from no one is going to buy a house ever again, to if people decide they want to get back into houses, this is bad for apartments." At the same time, the overall REIT sector underperformed the broader stock market as investors developed a greater appetite for risk. The Dow Jones Equity All REIT Index delivered a total return of 7.9 percent for the first quarter, while the Dow Jones Industrial Average and the S&P 500 index gained 11.93 percent and 10.6 percent, respectively.
What Does the Future Hold for Multifamily Mortgage Originations?
Digested From "Mortgage Rates on the Rise, Originations to Fall: MBA"
Housing Wire (04/02/13)
The Mortgage Bankers Association's latest outlook shows that growth in the first three months of this year accelerated after a slow fourth quarter due to strong inventory investment, retail sales, and less of a drag from the trade deficit. Commercial and multifamily mortgage originations climbed 49 percent between the third and fourth quarters of 2012 and were also up 49 percent versus the October-through-December period of 2011. Back in February, MBA officials forecast that originations would increase by 11 percent from 2012 levels. The fourth-quarter data also shows that the level of commercial/multifamily mortgage debt outstanding rose 0.9 percent by $21.8 billion as all four major investor groups added to their holdings. Finally, the final three-month period of the year registered the biggest gain in commercial and multifamily mortgage debt outstanding since 2008. Looking ahead, mortgage rates are expected to rise from 3.6 percent to 4.3 percent by this year's fourth quarter, according to MBA.
40 Percent of Largest Multifamily Housing Markets Lack Utility Energy Efficiency Programs
Digested From "40 Percent of Largest Multifamily Housing Markets Lack Utility Energy Efficiency Programs"
Energy Manager Today (03/08/13)
An American Council for an Energy-Efficient Economy report concludes that while energy efficiency programs funded by utility customers represent a significant opportunity to save energy in multifamily buildings, they present unique challenges that can easily be overlooked when grouped into programs for single-family and/or commercial buildings. By failing to effectively deliver programs that reach this market segment, utility-sponsored programs miss out on significant energy savings potential. The report, "Scaling up Multifamily Energy Efficiency Programs: A Metropolitan Area Assessment," examines expansion opportunities for energy efficiency programs in multifamily buildings in the 50 U.S. metropolitan areas with the largest multifamily housing markets. It says that energy efficiency programs need to overcome barriers such as split incentives between apartment owners and tenants and building owners' lack of capital to make major investments.
Deals and Transactions
Morgan Properties Closes $1.2B Refinancing on Apt. Communities
Digested From "Morgan Properties Closes $1.2B Refinancing on 73 Apartment Communities"
National Real Estate Investor (04/02/13)
Morgan Properties last week closed a $1.2 billion series of loans to refinance a portion of its multifamily housing portfolio encompassing 73 apartment communities containing 13,799 rental units. Originating the financing was Berkadia Commercial Mortgage. The various communities are spread throughout five East Coast states -- New York, New Jersey, Pennsylvania, Delaware, and Maryland -- and offer a mix of garden, mid-rise, and high-rise apartments. The portfolio also boasts an average occupancy rate of 95 percent. Morgan Properties acquired the majroity of these assets as part of its $1.9 billion acquisition of the Kushner portfolio six years ago. Of the 73 communities, 71 are eligible for securitization via Freddie Mac's K Deal Program. Morgan Properties President and CEO Mitchell Morgan states, "This transaction is the largest refinancing in the history of Morgan Properties dating back to our company’s inception in 1985. . . . We saw this as an unprecedented time to refinance our existing portfolio, by locking in attractive long-term financing at historically low interest rates."
New Apartments Are Well-Positioned in Hot Orlando Market
Digested From "Jefferson Apartment Group to Build 178-Unit M-F Project in Orlando"
Commercial Property Executive (04/02/13) Murray, Barbra
The Jefferson Apartment Group (JAG) has begun construction on its latest project. Azul Baldwin Park is located in Orlando's thriving, 1,100-acre Baldwin Park neighborhood. The 178-unit luxury apartment community is being built by the company and its investment partner, Pacolet Milliken Enterprises. Construction of the community's four- and five-story LEED-certified buildings is expected to be completed in the first quarter of 2014. Designed to provide accommodations and an atmosphere resembling those of an upscale boutique hotel, Azul will cater to renters with higher-end tastes in a city where a growing jobs market has resulted in an increasing need for apartments.
AIM 2013 Video Award Contestants Announced
Digested From "AIM 2013 Video Award Contestants Announced"
AIM News Release (04/08/13)
AIM 2013: The Art of Creativity just announced its official selections for the conference's inaugural multifamily video awards contest. Nearly 40 videos were entered into competition, and will be judged on engagement, creativity/originality, innovation, and technical merit across five categories including Best Training Video, Best Vendor Video, Best Community Marketing Video (with actors), Best Community Marketing Video (without actors), and Funniest video. Winners will be announced April 30 at the AIM Conference during a special awards ceremony hosted by Kate Good and featuring judges Israel Carunungan, Sarah Greenough, and Sarah Milligan. To take part in this first of its kind multifamily marketing event, visit the AIM website for registration information and viewing links to all video award submissions.
Report Challenges Tie Between Housing Vouchers, Crime
Digested From "Report Challenges Tie Between Housing Vouchers, Crime"
Chicago Tribune (03/29/13) Podmolik, Mary Ellen
Renters' use of Section 8 vouchers has long concerned communities that their presence will usher in more crime and lower property values. However, a new policy brief by researchers who studied crime patterns and voucher use in Chicago and nine other large cities over a number of years has debunked that supposition. The research, conducted by New York University's Furman Center for Real Estate and Urban Policy, found that housing vouchers do not bring crime to an area. Instead, very low-income people using the vouchers often have limited options and tend to live in areas where crime is already high. For their report, researchers looked at whether the number of voucher holders in an area one year led to an increase in crime the following year. They accounted for differences between neighborhoods and other factors that might lead to an increase in crime in certain areas and found no proof that an increase in voucher use directly led to increased levels of crime. Ingrid Gould Ellen, a Furman Center co-director, believes the results are important in cities like Chicago that are trying to move low-income residents into better living situations.
Tenants Can Now Pay Rent And Maintenance In Bitcoin
Digested From "Tenants Can Now Pay Rent And Maintenance In Bitcoin"
Alvic Property Management has become the first property management company to accept rent and maintenance payments in Bitcoin. Properties on the Alvic Property Management platform in the New York City metro area are now be able to accept payments with the speed and ease of credit card or eCheck payments without the risk of chargebacks or bounced eChecks. Bitcoin is a digital, decentralized, crypto-currency that operates without a central authority. Bitcoin enables secure instant payments to anyone, anywhere in the world. Through the Alvic Property Management platform, tenants and landlords will be able to save time and money by eliminating the fees and inconveniences of traditional payment methods. All properties managed by Alvic Property Management are currently accepting bitcoins. Residents initially need to reach out to their property manager to have their account enabled to accept bitcoin, they will then be able to then make payments to a Bitcoin address exclusive to their account. All bitcoin payments will post to the property bank account in U.S. dollars at the quoted bid price on the Mt.Gox Bitcoin exchange at the time of receipt.
Legal/Legislative Did You Know
Where Are All These Apartment Residents Going to Park in Portland?
Digested From "Parking Minimums for Apartment Buildings Headed to Council Vote"
OPB News (04/05/2013) Manning, Rob
This past week in Portland, Ore., planners came together with neighborhood activists and city commissioners to debate how to deal with large apartment communities going up in the Rose City without proper parking. Some are clamoring for new requirements so that new apartment stock will not clog neighborhood streets with parked cars. Others counter that more on-site parking encourages dependence on automobiles. Portland's planning commission has recommended requiring parking for 40-unit buildings near busy mass-transit routes and in commercial areas. Commissioner Nick Fish remarks, "Our effort is to strike a balance between the sustainability aspirations of the city, with the livability considerations through the prism of what’s actually going on in the street." Commissioners are expected to vote on the changes later this week.
Texas Senate Approves Criminal Background Checks on Off-Campus College Students
Digested From "Texas Senate Approves Criminal Background Checks on College Students Seeking On-Campus Housing"
Your Houston News (03/29/13) Williams, Tommy
The Texas Senate unanimously approved SB 146, which provides state colleges and universities access to Department of Public Safety files to aid in conducting criminal background checks on students who apply for on-campus housing. State Senate Finance Chair Tommy Williams, (R-The Woodlands), who wrote the bill, said, "Colleges should be aware of pending criminal charges." SB 146 does not require background checks, but allows schools to complete the checks they find necessary, says Williams. Access to the files is limited to a school's housing officer or police chief, would not be disclosed or released without a court order or student consent, and must be destroyed at the start of the semester.
Will More People Be Allowed Back in the Mortgage Pool?
Digested From "Wider Access to Loans Sought"
Washington Post (04/03/13) P. A1 Goldfarb, Zachary A.
The Obama administration is urging the financial community to give more mortgages to the segments of the population who are missing out on the budding housing recovery, such as borrowers whose credit was dinged by the recession and young people hoping to become homeowners for the first time. Years of scrutiny and repercussions have made banks skittish about lending at the low end. "If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you're leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery," explains former White House adviser Jim Parrott. At the same time, young people who are forming new households will be forced to rent rather than buy if they cannot qualify for financing. The administration is working with the FHA, Justice Department, and HUD on possible solutions that will give banks more assurance that they will not be held liable if borrowers later default. In addition, there is a push for lenders to be more subjective in their underwriting decisions. Critics warn that the drive for broader lending could pave the way for another housing crisis. American Enterprise Institute fellow Ed Pinto says the move "would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from."
Could Profitability Sink Fannie Mae and Freddie Mac?
Digested From "Fannie Mae and Freddie Mac Face New Problem: Profitability"
Bloomberg (04/01/13) Benson, Clea
The housing market rebound has led to healthy quarterly revenues for Fannie Mae and Freddie Mac. Their profitability could affect debates on housing finance reform, with U.S. Sen. Mark Warner (D-Va.) noting, "Bad news is if they make too much money, there may be a sense of, 'Well, let's not mess with them anymore.'" Given that lawmakers had planned to wind down and replace the GSEs before they could become profitable again, no plan for them to regain independence was created when they were taken into conservatorship in 2009, and since then, only small steps toward housing finance reform have been taken by Congress and the White House. Without concrete plans for reform, Fannie Mae and Freddie Mac could be in long-term limbo, remaining under government control even after they pay back more to the U.S. Treasury than they received as part of their bailout, with a new Treasury agreement that restricts their net worth to just $3 billion. According to Tim Rood of the financial services consulting firm Collingworth Group LLC, "They have no ability to recapitalize their business. They could spin of $100 billion next year and it wouldn't make a stitch of difference." Although Warner, Sen. Elizabeth Warren (D-Mass), and Sen. Bob Corker (R-Tenn.) are among those working on bipartisan housing finance reform legislation, a comprehensive bill has yet to be introduced in the House or Senate and the Treasury is still working on its housing finance reform blueprint.
NAA Offers $1 Million Prize For Best Education Conference Marketing Plan
A prize of $1 million will be awarded to the marketing firm or individual whose marketing proposal is adopted by the National Apartment Association (NAA) and doubles the paid registered attendance at the 2015 NAA Education Conference & Exposition.
The award is part of NAA’s new “Grow the Show” competition, designed to increase paid attendee registration at the 2015 conference by 100 percent or more over the 2013 NAA Education Conference & Exposition final paid attendee registration numbers.
Interested contestants are invited to submit proposals designed to accomplish this surge in conference attendance. All proposals will be submitted to a judging panel that will choose one proposal.
The successful group will have two years to implement its project from the conclusion of the 2013 NAA Education Conference & Exposition until the conclusion of the 2015 NAA Education Conference & Exposition in Las Vegas. Read the NAA Press Release.
2013 NAA Survey of Income & Expenses in Rental Apartment Communities
Some of the most valuable information your staff needs when preparing for the upcoming budget season is available to you for free from the National Apartment Association.
By your Company’s participation in the 2013 NAA Survey of Income & Expenses in Rental Apartment Communities, you will receive a free copy of detailed market and national economic analysis this fall that will help ensure valuable, accurate financial and benchmarking information for your company. This data helps you to compare your community’s performance against your peers.
There are several methods for your Company to complete the survey including using our designated Excel file to download data directly from your internal data systems or using our secure survey website. You can download a pdf version for reference to the questions and definitions.
If your (ownership or management) Company has multiple properties, please contact Janet Gora of CEL to determine the best response method for your company (Excel or Online). Janet can be reached at 310/207-7328. If you need an Access Code, contact NAA’s Valerie Sterns at 703/797-0624. The deadline to complete the survey is April 26.
Participate in Apartment Compensation Survey: And Get a Free Copy
NAA has partnered with CEL & Associates to conduct the National Apartment Compensation and Benefits Survey, the nation’s largest, most widely used, referenced and recognized compensation resource for the real estate industry. This is an overall Company/Corporate-level survey, and is completed by the Human Resources department or CFO/COO offices for your firm.
In its 24th year, the national survey encompasses compensation trends, benefits, compensation policy questions, long-term incentive compensation structures, and detailed information/statistical (quartile) breakout of compensation results on a position by position basis stratified by Company Size (employees), Company Type (public and private), Specialization, Region, and Metropolitan Area.
Companies wishing to participate can complete the survey on our < ahref="https://compsurvey.celassociates.com/Home/Login.aspx?ReturnUrl=%2f">secure survey website. In addition to the general company-level questions online, a designated Excel file is available to download individual salary/bonus data from your HRIS or other internal database. The survey results will be available in early August. Companies participating in the survey receive a complimentary copy of the results. For further information, contact CEL’s Janet Gora via email or at 310/207-7328. The deadline to complete the survey is April 26.
The 2013 NAA Green Conference Is One Week Away: Have You Registered Yet?
Of all the reasons to register for the 2013 NAA Green Conference, April 15-17 at the Baltimore Marriott Waterfront (there are many), first and foremost is the opportunity to hear proven methods for reducing onsite operating costs that are ideal for companies of all sizes.
If that’s not enough incentive to register today, consider that attendees will hear from executives from leading firms discuss how energy efficiency is yielding a real financial difference in their portfolios during the “Green” State of the Industry Executive Panel. Learn more about the speakers and what to expect at this groundbreaking session.
Still need another reason? All those registering for the 2013 NAA Green Conference will be entered into a drawing for two tickets to see the Baltimore Orioles host the Tampa Bay Rays on Tuesday, April 16, at 7 p.m. at Camden Yards, just a short, 5-minute walk from the conference hotel.
Time is running out. Visit the conference website to register today!
Next Friday Is Your Deadline for Big Savings on Registration for the 2013 NAA Education Conference & Exposition
Register by next Friday, April 19, to save up to $275 on registration for the 2013 NAA Education Conference & Exposition, June 19-22 in San Diego.
The largest multifamily housing event of the year, the 2013 NAA Education Conference & Exposition promises inspiration, innovation and connection as you join more than 6,200 of your closest friends for insight from world-class speakers, including Virgin Group Chairman Sir Richard Branson, Life is good® co-founder Bert Jacobs and entrepreneur, author and artist extraordinaire Erik Wahl (to name just a few; visit http://educonf.naahq.org/education to preview these and other exciting speakers), to the latest and greatest from the multifamily supplier partners in an exhibit space equal to that of four football fields.
The benefits of attendance don’t end there—awaiting you in San Diego are practical, take-home tactics from the more than 40 breakout sessions, as well as the opportunity to engage like-minded professionals during the plethora of networking events NAA has scheduled.
Catching this wave doesn’t require a surfboard, but you will need to register. Visit the conference website and remember to consider group discounts: register five or more attendees and save your organization up to $400!
Independent Rental Owners: Earn Your Credentials Online in May
Do you manage your own personally held rental properties? Are you searching for a way to learn what it takes to be a successful property manager? Is your time valuable and in short supply?
If you've answered yes to any (or all!) of these questions, then be aware the NAA Education Institute is now offering you the chance to earn your Independent Rental Owner Professional (IROP) Certificate entirely online.
The webinar series will begin Tuesday, May 7 and will run every Tuesday through May 28. All webinars will run from Noon to 3 p.m. ET. Cost is $349 for members and $499 for non-members. Module pricing is $99 for members and $125 for non-members.
NAAEI Designation Courses Offered Near You!
Greater Charlotte Apartment Association
East Bay Rental Housing Association
Nevada State Apartment Association
Roanoke Valley Apartment Association
Chicagoland Apartment Association
July - August, 2013
Central Iowa Apartment Alliance
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
Apartment and Office Building Association of Metropolitan Washington
Greater Charlotte Apartment Association
Roanoke Valley Apartment Association
To find more courses in your area, click here.
For more information about any of the classes listed, please contact Kimberly McCrossen at email@example.com or 703/518-6141 ext. 121.
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