Daily Archives: November 21, 2012

10 Cities Where Landlords and Renters are Miles Apart on Rents

ByDerek Mearns – MultiFamilyExecutive.com

The first step in the search for a new apartment is very often scouring internet listing services. Among the most important search criteria is usually the price range that an individual is willing to pay.

But how realistic are renters when seeking cheap apartment deals in major urban areas?

According to the newest data from Apartments.com, many Gen Y-ers and other first-time renters are way off on what the going rate is for an apartment in many of the most popular U.S. cities. And the price they are hoping to pay just doesn’t exist in many markets.

Take a look at 10 cities where renters severely underestimate the actual cost of rent when conducting their apartment searches online. Sometimes what someone wants to pay is nowhere close to what they will have to pay. Here’s some of the cities where hopeful renters and market-making landlords were the furthest apart:

City

Difference between actual rental rates and renter expectations

Brooklyn, N.Y.

-50%

Jersey City, N.J.

-47%

Oakland, Calif.

-46%

Boston, Mass.

-42%

New York, N.Y.

-41%

Denver, Colo.

-37%

Los Angeles, Calif.

-36%

Fort Lauderdale, Fla.

-35%

San Francisco, Calif.

-35%

North Hollywood, Calif.

-34%

Economy Watch: Existing Home Sales, Homebuilder Confidence, Stock Market Up

By Dees Stribling, Contributing Editor – CommercialPropertyExecutive.com

Existing U.S. home sales were up to an annualized rate of 4.79 million units in October, according to the National Association of Realtors on Monday. That’s an increase of 2.9 percent from the previous month, and 10.9 percent from October 2011, and on the whole a solid report.

Perhaps more importantly—at least for driving prices up further—total housing inventory nationwide at the end of October fell 1.4 percent to 2.14 million existing homes available for sale, which represents a 5.4-month supply at the current sales pace, down from 5.6 months in September, the NAR reported. That’s the lowest housing supply since February 2006, when it was 5.2 months. Listed inventory is 21.9 percent below a year ago, when there was a 7.6-month supply.

The Realtors also calculated that the national median existing-home price for all housing types was $178,600 in October, which is 11.1 percent above a year ago. This October marked the eighth consecutive monthly year-over-year increase, and the last time that happened was from October 2005 to May 2006, back in the bubble days. This time around, no one’s calling it a bubble.

Homebuilders Feeling Much Better

Fittingly, the National Association of Home Builders also released a report on Monday, and it found that builder confidence in the market for newly built, single-family homes posted a solid five-point gain so far in November to 46. That’s the closest the index has been to the optimism threshold of 50 since well before the housing bubble popped and the Great Recession decimated the new housing industry.

Two out of three of the index’s component indexes registered gains in November. The component gauging current sales conditions posted the biggest increase, with an eight-point gain to 49, its highest mark in more than six years. The component measuring sales expectations for the next six months held above 50 for a third consecutive month with a two-point gain to 53, and the component measuring traffic of prospective buyers held unchanged at 35 following a five-point gain in the previous month.

“While our confidence gauge has yet to breach the 50 mark—at which point an equal number of builders view sales conditions as good versus poor—we have certainly made substantial progress since this time last year, when [the index] stood at 19,” NAHB chief economist David Crowe said in a statement. “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”

Wall Street was also feeling chipper on the Monday before Thanksgiving, perhaps on hopes that the fiscal cliff boogeyman might actually go away. The Dow Jones Industrial Average gained 207.65, or 1.65 percent, the most in quite a few trading sessions. The S&P 500 gained 1.99 percent, while the Nasdaq advanced 2.21 percent.

Characteristics of Generation Y and Its Effect on Apartment Demand

by  – Property Management Insider

At MPF Research, we are often asked: How can the U.S. apartment market record such strong demand given that employment growth has been lukewarm and that increasing numbers of Generation Y – the key demographic for the apartment industry – are living at home with Mom and Dad?

Recent apartment demand numbers have been far above what anyone likely would have predicted during the downturn in the economy. Since 2009, the U.S. apartment sector has absorbed nearly 800,000 units on net. The last time demand proved remotely comparable over a three-and-a-half year stretch was from 1997 to 2000. The difference, though, is that the U.S. employment market was in substantially better shape back then – expanding at an average annual rate of 2.4%. Since 2009, annual employment growth hasn’t topped 1.6%. That amounts to about 1 million fewer jobs being created per year, of late. And the share of Gen Y living at home with parents has grown from 19% to 24% over the last decade, according to a recent study.

So how can apartment demand be so strong given those headwinds? There are two major demographic trends at work.

Generation Y is Delaying Marriage

Many analysts first point to the nation’s falling home ownership rate. But that’s only part of the story – and perhaps a smaller piece than most people think, given that most families losing their homes to foreclosure end up back in the single-family home market as renters.

There are arguably more important, though less-discussed, factors at play. There are simply more young adults than ever before. And, furthermore, a smaller share of them is getting married, which limits the likelihood that home ownership is their desired living situation.

Let’s do some math. Right now (well, technically as of the 2010 Census), there are 62.6 million people between the ages of 20 and 34. Within this group, 59%, or 36.7 million people, have never been married.

(Some 31%, or 19.4 million people, are married, and another 10%, or 6 million people, have been married at some point in the past but aren’t now.)

Looking back to 2000, the number of 20- to 34-year-olds was modestly smaller at 58.6 million, and the number of never-married folks in the group was much, much smaller at 27.5 million, because the share of adults remaining single through their early- to mid-30s has shifted by a drastic 12 percentage points over the course of the past decade.

That means we have 4 million more young adults than we did in 2000 and a whopping 9 million more never-married young adults compared to the decade-earlier figure.

Those patterns clearly are positive for the apartment sector, though the exact impact is tough to quantify. The numbers above shouldn’t be construed as one person, one household. Gen Y has a variety of living arrangements, including living alone, with one or many roommates, or with a partner, which is increasingly common. It is reasonable to assume, however, that with a growing pool of young adults – and, perhaps even more significantly, with fewer of them getting married – the pool of prime prospects for apartments is much, much bigger than it was previously.

So how long can apartment demand remain strong? While many members of Gen Y have delayed marriage, a large number of them will likely tie the knot eventually. And with the economy improving to some degree and with home prices no longer deteriorating in most areas, more of them will look to finally take the home ownership plunge, as well. However, that doesn’t mean apartment demand will taper off.

Generation Y is Living with Mom and Dad

Let’s examine the Boomerang Generation. It’s a catchy moniker given to members of Gen Y who are living with their parents, and it’s been an impediment to apartment demand thus far. However, if the apartment sector starts to see more renters lost to home purchase, it will likely be a byproduct of an improving economy. And a better economy means more jobs – and more of Gen Y leaving Mom and Dad.

Doing some calculations based on Census data and a recent study by Ohio State University, there are about 15 million young adults living with parents, up roughly 3.9 million from the count seen in 2000. It’s safe to assume many of them will eventually end up as apartment renters.

At the same time, the size of the population reaching adulthood will remain at peak levels. The youngest members of Generation Y are still in their mid-teens. An even moderately better economy should translate to fewer 20-somethings boomeranging home to Mom and Dad.

Providence Rents Aren’t Moving Much

by  – Property Management Insider

Northeast apartment markets generally rank as the tightest across the country. Among the 16 metros there that MPF Research counts in our U.S. results for the nation’s 100 largest markets, average occupancy of 96.5 percent is 1.1 percentage points above the norm. And every single metro records occupancy at or above that U.S. average of 95.4 percent.

Providence is a typical occupancy performer for the region. The area’s current occupancy figure of 96.5 percent exactly matches the regional norm, and the rate has been hovering at roughly 96 to 97 percent since the middle months of 2010. There’s very little variation in occupancy results by either product niche or neighborhood.

However, Providence is not doing as well as most other metros in the Northeast when it comes to apartment rent growth. Whereas the annual change in effective rents for new leases is running at 3 percent across the region as a whole, pricing in Providence went up just 1.1 percent between 3rd quarter 2011 and 3rd quarter 2012.

A still-challenged economy that is holding back wage growth appears to be the biggest obstacle that Providence faces in getting rents moving up more significantly. September’s unemployment rate in Providence was 9.8 percent, well above the national norm and tremendously over pre-recession levels that were below 6 percent. The total job count in the metro is still down about 45,000 positions, or 8 percent, from the late 2007 figure.

The latest stats did bring the first real signs of some progress, however. The unemployment rate as of September was down to single digits for the first time since late 2008, and year-over-year change in the total job tally finally was up a little on an annual basis. Some 2,200 positions were added.

Economy Watch: Existing Home Sales See Healthy Increase

By Dees Stribling, Contributing Editor – MultiHousingNews.com

Existing U.S. home sales were up to an annualized rate of 4.79 million units in October, according to the National Association of Realtors on Monday. That’s an increase of 2.9 percent from the previous month, and 10.9 percent from October 2011, and on the whole a solid report.

Perhaps more importantly—at least for driving prices up further—total housing inventory nationwide at the end of October fell 1.4 percent to 2.14 million existing homes available for sale, which represents a 5.4-month supply at the current sales pace, down from 5.6 months in September, the NAR reported. That’s the lowest housing supply since February 2006, when it was 5.2 months. Listed inventory is 21.9 percent below a year ago, when there was a 7.6-month supply.

The Realtors also calculated that the national median existing-home price for all housing types was $178,600 in October, which is 11.1 percent above a year ago. This October marked the eighth consecutive monthly year-over-year increase, and the last time that happened was from October 2005 to May 2006, back in the bubble days. This time around, no one’s calling it a bubble.

Homebuilders feeling much better

Fittingly, the National Association of Home Builders also released a report on Monday, and it found that builder confidence in the market for newly built, single-family homes posted a solid five-point gain so far in November to 46. That’s the closest the index has been to the optimism threshold of 50 since well before the housing bubble popped and the Great Recession decimated the new housing industry.

Two out of three of the index’s component indexes registered gains in November. The component gauging current sales conditions posted the biggest increase, with an eight-point gain to 49, its highest mark in more than six years. The component measuring sales expectations for the next six months held above 50 for a third consecutive month with a two-point gain to 53, and the component measuring traffic of prospective buyers held unchanged at 35 following a five-point gain in the previous month.

“While our confidence gauge has yet to breach the 50 mark—at which point an equal number of builders view sales conditions as good versus poor—we have certainly made substantial progress since this time last year, when the [index] stood at 19,” NAHB chief economist David Crowe observed in a press statement. “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”

Wall Street was also feeling chipper on the Monday before Thanksgiving, perhaps on hopes that the fiscal cliff boogeyman might actually go away. The Dow Jones Industrial Average gained 207.65, or 1.65 percent, the most in quite a few trading sessions. The S&P 500 gained 1.99 percent, while the Nasdaq advanced 2.21 percent.

The 5 Best and 5 Worst Cities for Rents in October

By Derek Mearns – Multi-Family Executive Magazine

While rent growth didn’t fluctuate too much from September to October in 2012, there were still winners and losers. During the month, eight metro areas had annual effective-rent growth above 7 percent. Unfortunately, there were plenty of cities in the red, too.

Here’s a list of the top five metro areas for annual effective-rent growth and the five cities at the bottom of the barrel:

 

Metro Statistical Area (MSA)

Annual Effective-Rent Growth, 10/12

Occupancy Rate, 10/12

San Francisco

8.3%

95.8%

Naples, Fla.

8.0%

95.9%

Louisville, Ky.

7.9%

95.5%

Corpus Christi, Texas

7.8%

96.1%

Oakland, Calif.

7.4%

96.8%

Virginia Beach, Va.

-0.7%

92.9%

Las Vegas

-0.8%

91.2%

Tacoma, Wash.

-1.1%

93.7%

Mobile, Ala.

-1.3%

92.1%

Savannah, Ga.

-1.9%

94.4%