The multifamily real estate market showed resilience in the third quarter, despite the COVID-19 pandemic. Rent growth posted declines, yet rent payments have held steady and the market fared better than other property sectors.
Source: Arbor Chatter
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Thursday, November 19, 2020
Thursday, August 20, 2020
U.S. Multifamily Market Snapshot Q2 2020
The multifamily market felt the effects of the COVID-19 pandemic in the second quarter. Following a historically strong 10-year run, rent growth slowed and sales volume declined, as investors showed caution. Although the quarter’s results show that multifamily is not immune to the recession, and the course of the pandemic is still unknown, the sector has shown resiliency as compared with other sectors.
Source: Arbor Chatter
Friday, May 26, 2017
Q1 2017 Multifamily Market Update: Despite Slow Sales, Prices Still Up
This article was originally published on ALEX Chatter: Q1 2017 Multifamily Market Update: Despite Slow Sales, Prices Still Up and all charts and images are from ALEX Chatter.
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Average asking rents in Colorado Springs increased 6.6% year-over-year as of March 2017, according to Reis. While familiar primary markets comprise most of the top 10 strongest performing markets, we are starting to see more secondary markets outperforming.
The U.S. multifamily market continued to post positive results during Q1 2017. Rent growth remained strong, while vacancy remained low and demand kept pace with high levels of new supply. Investment activity was slow to start the year, although prices continued to increase.
Rental Market
According to data from Reis, the average asking rent in the U.S. reached $1,314/unit during Q1 2017, a 3.2% increase over the $1,273/unit average reported one year ago. This marked the 29th consecutive quarter of growth, although lower than the 5.7% annual growth rate reported one year ago. The asking rent for Class A properties increased 3.0% year-over-year, while Class B/C rents increased 3.1% for the same period. Overall, Reis forecasts rent growth will average 3.2% during 2017, then slow to 2.1% by 2021.
Landlords continued offering concessions in lieu of discounting rents, as the asking-to-effective rent spread was $54/unit at the end of the quarter, representing the largest gap since 2009. Asking rent increased 3.2% for the 12 months ending in March 2017, while effective rent grew 3.0%.
The strongest performing multifamily market in the U.S. over the last 12 months was Nashville, where average asking rent increased 8.1% to $1,029/unit, up from $952/unit. Rent growth has been boosted by active new development and by strong employment gains, led by the health-care industry. The supply chain bears watching, as nearly 8,000 units were completed over the last two years, and about 18,000 units are expected to be completed through 2021.
Seattle posted the second fastest growth among primary markets, increasing 7.1% to $1,606/unit from $1,500/unit. Driven by a strong local economy — with a broad industry base featuring aerospace, high-tech, and e-commerce — rents have increased in every quarter since 2009 in the market.
Reis also reported that the national vacancy rate remained low despite new deliveries, finishing the quarter at 4.3%. Vacancy was essentially unchanged from one year ago and remained below the most recent high of 8.0% in Q1 2010. The Class A vacancy rate finished at 6.0%, up slightly from 5.8% at the end of 2016, while the Class B/C vacancy rate was essentially unchanged at 2.9%. Reis forecasts the overall vacancy rate to finish 2017 at 4.8% and reach 5.2% by 2021.
Multifamily development continues to make headlines throughout the U.S., and while oversupply remains a concern, demand has so far been able to keep pace with supply. Reis forecasts a total of 291,352 new units to come online during 2017, eclipsing the 210,526 units that were delivered during 2016. Absorption totaled 207,103 units during 2016 and is expected to reach 211,614 units for 2017.
A pullback in supply is expected over the next several years and some 2017 projects could be pushed further into the cycle.
Sales Market
Multifamily investment activity was down sharply to start the year. Pricing increases, with sellers unwilling to lower asking prices, may point to a disconnect between buyers and sellers.
Data from Real Capital Analytics showed that a total of $26.0 billion in apartment transactions were recorded during Q1 2017, which was lower than the five-year quarterly average of $30.7 billion. The average sale price was up 11% compared to the five-year average price.
The average cap rate for Q1 2017 multifamily sales was 5.4%, down from 5.7% one year ago, and represented the lowest level on record. The cap rate spread over the 10-year Treasury yield was 290 bps, down 30 bps since the end of 2016.
The multifamily sector continued to show strong price growth compared to other property asset classes. The Moody’s/RCA CPPI™ apartment price index increased 8.1% during the 12 months ending in March 2017, but was lower than the 14.9% increase measured one year ago. The all property index increased 7.2% over the last 12 months, compared with 9.1% one year ago.
Economic Overview
As the U.S. economy continued into an eighth year of expansion, wage growth began to increase as the labor force neared full employment.
According to the U.S. Bureau of Labor Statistics (BLS), total nonfarm payroll employment edged up 1.6% for the 12 months ending in April 2017, as compared with 1.9% one year ago. The unemployment rate was 4.4%, an improvement on the 5.0% rate measured in April of last year.
The BLS also reported that real average hourly earnings increased 2.7% during the 12 months ending March 2017, as compared with a 2.5% gain for the 12 months ending in March 2016, while the Consumer Price Index (CPI) increased 2.4%.
Gross domestic product (GDP) rose at a 0.7% annual rate in Q1 2017, up from 2.1% during Q4 2016, as reported by the U.S. Bureau of Economic Analysis (BEA).
The U.S. Census Bureau reported that the homeownership rate finished Q1 2017 at 63.6%, down slightly from 63.7% at the end of 2016, yet slightly higher than the 63.5% rate reported one year ago. These compare with a high of 69.4% in 2004, during one of the biggest housing booms in history.
The S&P/Case-Shiller U.S. National Home Price Index© reported a 5.8% annual gain in February, up from 5.6% last month and 5.2% one year ago. Seattle, Portland, and Denver reported the highest year-over-year gains among the 20 cities over each of the last 12 months.
Monday, February 27, 2017
Multifamily Remains a Favored Asset Class — Q4 2016 Market Update
This article was originally published on ALEX Chatter: Multifamily Remains a Favored Asset Class — Q4 2016 Market Update and all charts and images are from ALEX Chatter.
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Nashville posted the second fastest growth among primary markets, with year-over-year rents climbing 8.2% to $1,020/unit, according to Reis.
Despite uncertainty surrounding the election and slowing rent growth in some higher-priced markets, U.S. multifamily properties remained a favored asset class during Q4 2016.
Overall, rent growth continued and vacancy held steady, while development was active and demand was elevated. Job growth remained strong, although economic growth remained slow, and uncertainty hung around the new administration and rising interest rates.
Rental Market
According to Reis, the average asking rent for multifamily properties in the U.S. reached $1,308/unit at the end of the year, a 3.7% increase over $1,261/unit one year ago. This marked the 28th consecutive quarter of growth. Over the last 15 years, multifamily rent growth has averaged 2.7% annually. Reis projects that rent will grow 3.5% during 2017, then will slow to 2.2% by 2021.
The asking rent for class A properties finished the quarter at $1,511/unit, up 3.4% from the $1,461/unit year-end 2015 mark, while the average for class B/C properties was $1,063/unit, up 3.5% from $1,027/unit.
Seattle claimed the top spot for rent growth among multifamily markets during 2016, where the average asking rent increased 10.5%, climbing to $1,601/unit, up from $1,449/unit. Rents have been driven by a strong local economy and increased foreign investment. Seattle also had the most active construction cranes in the country at the end of 2016, as well as the fastest home-price growth in the nation.
Nashville posted the second fastest growth among primary markets, increasing 8.2% to $1,020/unit, up from $943/unit. Rent growth has been boosted by strong employment gains, led by the health-care industry, and active new development. Nearly 8,000 units were completed over the last two years, and 17,800 units are expected to be completed through 2021.
Tacoma, a relief valve for Seattle’s soaring rents, posted 8.1% rent growth and finished at $960/unit, as compared with $888/unit one year ago. In addition, vacancy dipped to the lowest level since Reis has been tracking it.
While rent growth slowed throughout most of the Bay Area, Sacramento grew 7.9% during the year, rising to $1,178/unit from $1,092/unit, and representing the fourth fastest growth in the nation.
Portland posted the fifth largest rent growth during the year, at 7.4%, boosted by high-tech job growth, including renewable energy business and tech start-ups.
Growth in high-priced markets slowed at the end of the year, finishing flat compared to 2015 levels. Year-over-year rents in Boston was 0.3%, while New York City finished up 0.2%. San Francisco posted a decline of 0.3%.
Reis reported that the national vacancy rate finished the quarter at 4.2%, essentially unchanged from one year ago, although well below the most recent high of 8.0% in Q1 2010. Class A vacancy finished at 5.8%, essentially unchanged from the end of 2015, while class B/C vacancy improved to 2.8%, down from 3.1%. Overall, vacancy is expected to reach 4.7% in 2017, then increase to 5.1% by 2021.
More than 195,700 new multifamily units were completed in the U.S. during 2016, falling short of the 210,300 units completed during 2015, which was the highest total on records going back 15 years. Demand outpaced new supply during the year, with 197,600 units absorbed, which was higher than the 2015 total of 201,600 units.
Investment Sales
According to data from Real Capital Analytics, sales volume for multifamily properties in the U.S. reached a record-high total of $158.4 billion during 2016, slightly more than the previous high of $153.4 billion recorded during 2015. The average sale price was $145,700/unit, up from $135,900/unit for 2015.
Blackstone and Starwood Capital Group were the most active buyers during the year, with $14.5 billion and $10.6 billion in purchases, respectively.
The average cap rate was 5.7%, compared with 5.9% for 2015. In comparison, sales for all property types averaged a 6.1% cap rate in 2016 and 6.3% in 2015. The most recent high for multifamily cap rates was 7.0% during the third quarter of 2009.
Private investors accounted for 58.9% of multifamily transactions, the largest share of all investor types, and was higher than the 53.2% share reported during 2015. Cross-border capital investment represented 5.7% of total volume, down from 12.8% in 2015.
The Moody’s/RCA CPPI™ apartment price index increased 12.7% during the 12 months ending in November 2016, lower than the 14.8% increase measured one year ago. The all property index increased 9.3% over the last 12 months, compared with 11.5% one year ago.
Economic Overview
The U.S. Bureau of Labor Statistics reported that employment increased 1.5% during 2016. The largest increases were in the professional and business services (up 2.7%) and education and health services (up 2.4%) sectors, while mining and logging posted the biggest loss (down 10.3%). Job growth totaled 2.2 million in 2016, slightly lower than the increase of 2.7 million during 2015.
The Consumer Price Index increased 2.1% for the 12 months ending December, breaching Federal Reserve’s inflation target of 2.0%, and was the largest 12-month increase since the period ending June 2014. The index for all items less food and energy rose 2.2% and the energy index increased 5.4%.
Gross Domestic Product for the U.S. increased 1.9% during Q4 2016, down from 3.5% in Q3 2016. Growth was driven lower in part by a downturn in federal spending and weaker exports, which were offset by increased housing investment. Full-year growth for 2016 was 1.6%, matching the slowest annual pace since the recovery began.
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Nashville posted the second fastest growth among primary markets, with year-over-year rents climbing 8.2% to $1,020/unit, according to Reis.
Overall, rent growth continued and vacancy held steady, while development was active and demand was elevated. Job growth remained strong, although economic growth remained slow, and uncertainty hung around the new administration and rising interest rates.
Rental Market
According to Reis, the average asking rent for multifamily properties in the U.S. reached $1,308/unit at the end of the year, a 3.7% increase over $1,261/unit one year ago. This marked the 28th consecutive quarter of growth. Over the last 15 years, multifamily rent growth has averaged 2.7% annually. Reis projects that rent will grow 3.5% during 2017, then will slow to 2.2% by 2021.
The asking rent for class A properties finished the quarter at $1,511/unit, up 3.4% from the $1,461/unit year-end 2015 mark, while the average for class B/C properties was $1,063/unit, up 3.5% from $1,027/unit.
Seattle claimed the top spot for rent growth among multifamily markets during 2016, where the average asking rent increased 10.5%, climbing to $1,601/unit, up from $1,449/unit. Rents have been driven by a strong local economy and increased foreign investment. Seattle also had the most active construction cranes in the country at the end of 2016, as well as the fastest home-price growth in the nation.
Nashville posted the second fastest growth among primary markets, increasing 8.2% to $1,020/unit, up from $943/unit. Rent growth has been boosted by strong employment gains, led by the health-care industry, and active new development. Nearly 8,000 units were completed over the last two years, and 17,800 units are expected to be completed through 2021.
Tacoma, a relief valve for Seattle’s soaring rents, posted 8.1% rent growth and finished at $960/unit, as compared with $888/unit one year ago. In addition, vacancy dipped to the lowest level since Reis has been tracking it.
While rent growth slowed throughout most of the Bay Area, Sacramento grew 7.9% during the year, rising to $1,178/unit from $1,092/unit, and representing the fourth fastest growth in the nation.
Portland posted the fifth largest rent growth during the year, at 7.4%, boosted by high-tech job growth, including renewable energy business and tech start-ups.
Growth in high-priced markets slowed at the end of the year, finishing flat compared to 2015 levels. Year-over-year rents in Boston was 0.3%, while New York City finished up 0.2%. San Francisco posted a decline of 0.3%.
Reis reported that the national vacancy rate finished the quarter at 4.2%, essentially unchanged from one year ago, although well below the most recent high of 8.0% in Q1 2010. Class A vacancy finished at 5.8%, essentially unchanged from the end of 2015, while class B/C vacancy improved to 2.8%, down from 3.1%. Overall, vacancy is expected to reach 4.7% in 2017, then increase to 5.1% by 2021.
More than 195,700 new multifamily units were completed in the U.S. during 2016, falling short of the 210,300 units completed during 2015, which was the highest total on records going back 15 years. Demand outpaced new supply during the year, with 197,600 units absorbed, which was higher than the 2015 total of 201,600 units.
Investment Sales
According to data from Real Capital Analytics, sales volume for multifamily properties in the U.S. reached a record-high total of $158.4 billion during 2016, slightly more than the previous high of $153.4 billion recorded during 2015. The average sale price was $145,700/unit, up from $135,900/unit for 2015.
Blackstone and Starwood Capital Group were the most active buyers during the year, with $14.5 billion and $10.6 billion in purchases, respectively.
The average cap rate was 5.7%, compared with 5.9% for 2015. In comparison, sales for all property types averaged a 6.1% cap rate in 2016 and 6.3% in 2015. The most recent high for multifamily cap rates was 7.0% during the third quarter of 2009.
Private investors accounted for 58.9% of multifamily transactions, the largest share of all investor types, and was higher than the 53.2% share reported during 2015. Cross-border capital investment represented 5.7% of total volume, down from 12.8% in 2015.
The Moody’s/RCA CPPI™ apartment price index increased 12.7% during the 12 months ending in November 2016, lower than the 14.8% increase measured one year ago. The all property index increased 9.3% over the last 12 months, compared with 11.5% one year ago.
Economic Overview
The U.S. Bureau of Labor Statistics reported that employment increased 1.5% during 2016. The largest increases were in the professional and business services (up 2.7%) and education and health services (up 2.4%) sectors, while mining and logging posted the biggest loss (down 10.3%). Job growth totaled 2.2 million in 2016, slightly lower than the increase of 2.7 million during 2015.
The Consumer Price Index increased 2.1% for the 12 months ending December, breaching Federal Reserve’s inflation target of 2.0%, and was the largest 12-month increase since the period ending June 2014. The index for all items less food and energy rose 2.2% and the energy index increased 5.4%.
Gross Domestic Product for the U.S. increased 1.9% during Q4 2016, down from 3.5% in Q3 2016. Growth was driven lower in part by a downturn in federal spending and weaker exports, which were offset by increased housing investment. Full-year growth for 2016 was 1.6%, matching the slowest annual pace since the recovery began.
Wednesday, December 7, 2016
Multifamily Market Update — Q3 2016
This article was originally published on ALEX Chatter: Multifamily Market Update — Q3 2016 and all images are from ALEX Chatter.
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The U.S. multifamily market continued to be boosted by the strong national economy during Q3 2016, as the job market posted steady gains and home prices approached pre-recession levels, although uncertainty remained around interest rates and added supply.
Rent Growth
According to Reis, the average asking rent reached $1,272/unit, a 3.9% increase over the $1,224/unit average one year ago, and has risen in every quarter since Q1 2010. The Class A average was $1,473/unit, up 3.8% year-over-year, while Class B/C properties increased 3.4% to $1,030/unit. Among primary markets, New York City posted the highest rent nationally, at $3,499/unit, followed by San Francisco, at $2,548/unit. Overall, Reis forecasts rents to grow 3.7% during 2016, and slow to 2.3% by 2020.
The strongest performing multifamily market in the U.S. over the last 12 months was Seattle, where average asking rent increased 9.3%, climbing to $1,491/unit, from $1,364/unit. Driven by a strong local economy—with a broad industry base featuring aerospace, high-tech, and e-commerce—rents have increased in every quarter since 2009 in the market.
Portland posted the second largest increase in the nation, boosted by high-tech job growth, including renewable energy business and tech start-ups. The area’s strong local economy built on port distribution, strong tourism, and affordability compared to the Bay Area, should help Portland remain a strong performer in the long run.
One of the fastest movers year-to-date has been Atlanta, where asking rents increased 7.2%, to $1,067/unit from $995/unit. The market moved to #3 from #15 at the end of 2015. Atlanta has shown signs of its pre-recession past, with a strong housing market and inward-migration amid steady job growth.
Markets in the Bay Area have slipped. At the end of the third quarter, San Francisco came in at #75 out of 75 markets, with a 0.5% increase (the market was ranked #2 at the end of 2015) and Oakland-East Bay ranked #46 with a 3.2% increase (previously #7).
Vacancy Rate
The vacancy rate finished at 4.4%, an increase compared with 4.3% one year ago, although slightly higher than the most recent low of 4.2% reported in Q2 2015. The Class A vacancy rate was 6.2%, while Class B/C properties finished the quarter at 3.0%. Detroit had the lowest vacancy rate at 2.5%. Development of Class A properties is expected to exert upward pressure on the vacancy rate for the high-end market, while demand for Class B/C rentals is expected to remain high amid tighter supply conditions. Overall, Reis forecasts vacancy to increase to 5.1% by the end of 2020.
Nearly 46,000 new multifamily units were completed in the U.S. through the first nine months of 2016, compared to 206,000 units for all of 2015. Reis forecasts 218,000 new units to come online during 2016, representing 2.1% of the existing inventory, and would be the highest annual total on record. Absorption is forecast to reach 179,000 units for the year, falling short of the 2015 total of 188,000. An additional 492,000 units are expected to be completed through 2020, increasing inventory by 4.6%, with absorption expected to total 414,000 units during that time.
Multifamily Investment Sales
According to Real Capital Analytics, sales volume for U.S. multifamily properties totaled $35.0 billion during Q3 2016, higher than the three-year quarterly average of $32.9 billion, and brought the year-to-date total to $111.3 billion. Annual sales volume was on pace to reach $148.4 billion, which would nearly match 2015’s record-high total of $151.3 billion.
Real Capital Analytics also reported that cross-border capital investment represented 5.6% of total volume through the first nine months of the year, down from 12.8% for all of 2015. These transactions accounted for $6.2 billion in volume, one third the 2015 total of $19.6 billion.
Employment Growth
On the economic front, the U.S. Bureau of Labor Statistics reported that employment in United States increased 1.6%, or 2.4 million jobs, during the 12 months ending in October 2016.
Job growth averaged 181,000 per month year-to-date, compared with an average of 229,000 per month in 2015. The largest gains over the last 12 months were in the professional and business services (up 2.7%), construction (up 2.6%), and education and health services (up 2.6%) sectors.
The largest year-over-year increases in employment among metropolitan divisions were Fort Lauderdale-Pompano Beach-Deerfield Beach, FL (up 4.4%), Dallas-Plano-Irving, TX (up 4.2%), and Haverhill-Newburyport-Amesbury Town, MA-NH (up 4.2%).
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The U.S. multifamily market continued to be boosted by the strong national economy during Q3 2016, as the job market posted steady gains and home prices approached pre-recession levels, although uncertainty remained around interest rates and added supply.
Rent Growth
According to Reis, the average asking rent reached $1,272/unit, a 3.9% increase over the $1,224/unit average one year ago, and has risen in every quarter since Q1 2010. The Class A average was $1,473/unit, up 3.8% year-over-year, while Class B/C properties increased 3.4% to $1,030/unit. Among primary markets, New York City posted the highest rent nationally, at $3,499/unit, followed by San Francisco, at $2,548/unit. Overall, Reis forecasts rents to grow 3.7% during 2016, and slow to 2.3% by 2020.
The strongest performing multifamily market in the U.S. over the last 12 months was Seattle, where average asking rent increased 9.3%, climbing to $1,491/unit, from $1,364/unit. Driven by a strong local economy—with a broad industry base featuring aerospace, high-tech, and e-commerce—rents have increased in every quarter since 2009 in the market.
Portland posted the second largest increase in the nation, boosted by high-tech job growth, including renewable energy business and tech start-ups. The area’s strong local economy built on port distribution, strong tourism, and affordability compared to the Bay Area, should help Portland remain a strong performer in the long run.
One of the fastest movers year-to-date has been Atlanta, where asking rents increased 7.2%, to $1,067/unit from $995/unit. The market moved to #3 from #15 at the end of 2015. Atlanta has shown signs of its pre-recession past, with a strong housing market and inward-migration amid steady job growth.
Markets in the Bay Area have slipped. At the end of the third quarter, San Francisco came in at #75 out of 75 markets, with a 0.5% increase (the market was ranked #2 at the end of 2015) and Oakland-East Bay ranked #46 with a 3.2% increase (previously #7).
Vacancy Rate
The vacancy rate finished at 4.4%, an increase compared with 4.3% one year ago, although slightly higher than the most recent low of 4.2% reported in Q2 2015. The Class A vacancy rate was 6.2%, while Class B/C properties finished the quarter at 3.0%. Detroit had the lowest vacancy rate at 2.5%. Development of Class A properties is expected to exert upward pressure on the vacancy rate for the high-end market, while demand for Class B/C rentals is expected to remain high amid tighter supply conditions. Overall, Reis forecasts vacancy to increase to 5.1% by the end of 2020.
Nearly 46,000 new multifamily units were completed in the U.S. through the first nine months of 2016, compared to 206,000 units for all of 2015. Reis forecasts 218,000 new units to come online during 2016, representing 2.1% of the existing inventory, and would be the highest annual total on record. Absorption is forecast to reach 179,000 units for the year, falling short of the 2015 total of 188,000. An additional 492,000 units are expected to be completed through 2020, increasing inventory by 4.6%, with absorption expected to total 414,000 units during that time.
Multifamily Investment Sales
According to Real Capital Analytics, sales volume for U.S. multifamily properties totaled $35.0 billion during Q3 2016, higher than the three-year quarterly average of $32.9 billion, and brought the year-to-date total to $111.3 billion. Annual sales volume was on pace to reach $148.4 billion, which would nearly match 2015’s record-high total of $151.3 billion.
Real Capital Analytics also reported that cross-border capital investment represented 5.6% of total volume through the first nine months of the year, down from 12.8% for all of 2015. These transactions accounted for $6.2 billion in volume, one third the 2015 total of $19.6 billion.
Employment Growth
On the economic front, the U.S. Bureau of Labor Statistics reported that employment in United States increased 1.6%, or 2.4 million jobs, during the 12 months ending in October 2016.
Job growth averaged 181,000 per month year-to-date, compared with an average of 229,000 per month in 2015. The largest gains over the last 12 months were in the professional and business services (up 2.7%), construction (up 2.6%), and education and health services (up 2.6%) sectors.
The largest year-over-year increases in employment among metropolitan divisions were Fort Lauderdale-Pompano Beach-Deerfield Beach, FL (up 4.4%), Dallas-Plano-Irving, TX (up 4.2%), and Haverhill-Newburyport-Amesbury Town, MA-NH (up 4.2%).
Tuesday, July 19, 2016
Summary of the JCHS’s State of the Nation's Housing 2016 Report
This article was originally published on ALEX Chatter: Harvard Study Shows Multifamily Demand at a Three-Decade High.
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The Joint Center for Housing Studies of Harvard University (JCHS) recently released its The State of the Nation’s Housing 2016 report, which found that multifamily vacancy is at three-decade low, while rents are at a three-decade inflation-adjusted high.
Below are findings from the current report most relevant to multifamily investors.
Homeownership Continues to Decline
In 2015, the U.S. homeownership rate reached its lowest level since the 1960s, falling to 63.7%. Declines were particularly large in the first-time homebuyer age groups, although all age groups have declined since 1995 except for the oldest generations.
Three factors have led to the decline in homeownership. First, foreclosures remain approximately twice the annual average compared to before the downturn and are likely to continue to exert downward pressure on homeownership in the short-term. Second, subprime borrowers (those with credit scores below 620) are far less likely to have their mortgage credit extended as compared to during the early 2000s. Third, real incomes have dropped 18% among 25-34 year olds and 9% among 35-44 year olds between 2000 and 2014.
The report cites several factors expected to improve homeownership levels in the future, including a loosening of credit standards for mortgage borrowers and increased wage growth. It also states other factors that could have a negative effect on homeownership, such as the rising tide of student loan debt: The share of the 20-39 age group with student debt jumped to 39% in 2013, compared to 22% in 2001. During that time, the average debt balance increased from $17,000 to $30,000 per borrower.
Home buying has also been delayed by the increased average age of marriage and childbirth, as well as the growing minority population — though offset by aging baby boomers, who increased the rate of homeownership. The study was unable to make a determination as to whether the housing crisis permanently diminished the appeal of homeownership in the U.S., though points to evidence that it did not.
Rental Market
In good news for multifamily investors, the housing recovery continues to be driven by the rental market. Over 36% of U.S. households rented in 2015, the largest share since the late 1960s. The number of renters increased by 9 million over the previous 10 years, which was the largest 10-year gain on record. Demand has been driven by all age groups, with the largest gains measured among older renters and families with children.
This high level of demand has driven vacancy rates steadily downward since 2010, falling to 7.1% at the end of 2015. Additionally, rents increased 3.6% during 2015, based on the Consumer Price Index for rent of primary residences. Adjusted for inflation, it has been three decades since either indicator of the rental market reached such levels.
Although activity has spiked in the multifamily development pipeline, which could help loosen conditions, much of the new supply is intended for the upper end of the market. The national average for high-end new developments was $1,381 per month during 2015, well out of the price range of the typical earner’s average earnings of $35,000 per year.
The Moody’s/RCA price index for multifamily properties was 39% above its previous high at the end of 2015, and capitalization rates were below the levels reported prior to the recession. Valuations were especially high in gateway markets such as New York, where property levels were up 93% compared to their previous peak, and San Francisco, up 85%.
Affordability Remains an Issue
The number of cost-burdened households remains an issue on both the owner and renter sides.
On the ownership side, the number of households paying more than 30% of income for housing decreased by 4.4 million households since 2008, finishing off 2014 at 18.5 million. However, the decline in cost-burdened ownership has been improved by high foreclosure rates pushing out financially strained owners.
On the rental side, the number of households paying more than 30% of income for rent increased by 3.6 million since 2008, finishing off 2014 at 21.3 million. The number of severely burdened households paying more than 50% of income increased by 2.1 million, to a record 11.4 million. Among the nation’s lowest-income renters — those earning less than $15,000 — 72% are severely burdened.
Outlook
The rental market continues to expand at a robust pace, while the owner-occupied market continues to recover. Home prices have rebounded since the recession, and homeownership rates are expected to remain level over the next few years. However, affordability remains a major issue in the U.S., with record numbers of renters paying more than half their income for housing.
Download the full 2016 State of the Nation’s Housing report.
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The Joint Center for Housing Studies of Harvard University (JCHS) recently released its The State of the Nation’s Housing 2016 report, which found that multifamily vacancy is at three-decade low, while rents are at a three-decade inflation-adjusted high.
Below are findings from the current report most relevant to multifamily investors.
Homeownership Continues to Decline
In 2015, the U.S. homeownership rate reached its lowest level since the 1960s, falling to 63.7%. Declines were particularly large in the first-time homebuyer age groups, although all age groups have declined since 1995 except for the oldest generations.
Three factors have led to the decline in homeownership. First, foreclosures remain approximately twice the annual average compared to before the downturn and are likely to continue to exert downward pressure on homeownership in the short-term. Second, subprime borrowers (those with credit scores below 620) are far less likely to have their mortgage credit extended as compared to during the early 2000s. Third, real incomes have dropped 18% among 25-34 year olds and 9% among 35-44 year olds between 2000 and 2014.
The report cites several factors expected to improve homeownership levels in the future, including a loosening of credit standards for mortgage borrowers and increased wage growth. It also states other factors that could have a negative effect on homeownership, such as the rising tide of student loan debt: The share of the 20-39 age group with student debt jumped to 39% in 2013, compared to 22% in 2001. During that time, the average debt balance increased from $17,000 to $30,000 per borrower.
Home buying has also been delayed by the increased average age of marriage and childbirth, as well as the growing minority population — though offset by aging baby boomers, who increased the rate of homeownership. The study was unable to make a determination as to whether the housing crisis permanently diminished the appeal of homeownership in the U.S., though points to evidence that it did not.
Rental Market
In good news for multifamily investors, the housing recovery continues to be driven by the rental market. Over 36% of U.S. households rented in 2015, the largest share since the late 1960s. The number of renters increased by 9 million over the previous 10 years, which was the largest 10-year gain on record. Demand has been driven by all age groups, with the largest gains measured among older renters and families with children.
This high level of demand has driven vacancy rates steadily downward since 2010, falling to 7.1% at the end of 2015. Additionally, rents increased 3.6% during 2015, based on the Consumer Price Index for rent of primary residences. Adjusted for inflation, it has been three decades since either indicator of the rental market reached such levels.
Although activity has spiked in the multifamily development pipeline, which could help loosen conditions, much of the new supply is intended for the upper end of the market. The national average for high-end new developments was $1,381 per month during 2015, well out of the price range of the typical earner’s average earnings of $35,000 per year.
The Moody’s/RCA price index for multifamily properties was 39% above its previous high at the end of 2015, and capitalization rates were below the levels reported prior to the recession. Valuations were especially high in gateway markets such as New York, where property levels were up 93% compared to their previous peak, and San Francisco, up 85%.
Affordability Remains an Issue
The number of cost-burdened households remains an issue on both the owner and renter sides.
On the ownership side, the number of households paying more than 30% of income for housing decreased by 4.4 million households since 2008, finishing off 2014 at 18.5 million. However, the decline in cost-burdened ownership has been improved by high foreclosure rates pushing out financially strained owners.
On the rental side, the number of households paying more than 30% of income for rent increased by 3.6 million since 2008, finishing off 2014 at 21.3 million. The number of severely burdened households paying more than 50% of income increased by 2.1 million, to a record 11.4 million. Among the nation’s lowest-income renters — those earning less than $15,000 — 72% are severely burdened.
Outlook
The rental market continues to expand at a robust pace, while the owner-occupied market continues to recover. Home prices have rebounded since the recession, and homeownership rates are expected to remain level over the next few years. However, affordability remains a major issue in the U.S., with record numbers of renters paying more than half their income for housing.
Download the full 2016 State of the Nation’s Housing report.
Friday, April 8, 2016
In Case You Missed It: Week of April 4, 2016
Manhattan rents drop for first time in 2 years
The Real Deal
April 7, 2016
“For the first time in two years, the median residential rental price has decreased in the borough, according to a new report by Douglas Elliman. The median rent in March dropped to $3,300, a 2.8 percent decrease from March 2015. Over the last few months, the rate of price growth slowed, preluding a rental flatline.”
U.S. Apartment Market Shows Signs of Losing Steam
The Wall Street Journal ($)
April 7, 2016
“The apartment-rental market cooled in the first quarter, according to reports from three research companies, suggesting a six-year boom that has pushed the cost of housing to unaffordable heights in many U.S. cities might be coming to an end.”
Rogue One: A Star Wars Story (2016) Teaser Trailer
Trailer Addict
April 07, 2016
“Rogue One is about a group of rebels who set out on a mission to steal the plans for the Death Star. This is only the first teaser, so don't expect too much to be revealed, but they do show quite a bit and it looks amazing.”
Experts warn affordable housing rules will hurt development
The New York Post
April 5, 2016
“The City Council and Mayor de Blasio can high-five all they want, but real estate experts believe the new Mandatory Inclusionary Housing (MIH) policies that require affordable units to be interspersed throughout buildings — while so far, not providing any real estate tax breaks in return for the lower rents — will put a damper on development.”
Will Rising U.S. Debt Levels Keep the Fed On Hold?
Charles Schwab
April 4, 2016
“The national debt factors into the Fed’s decisions only insofar as it affects the economy and inflation. Otherwise, fiscal policy is in the hands of Congress. So, what do the debt dynamics look like? The Congressional Budget Office (CBO) compiles a lot of useful data on this topic. It recently released its updated 10-year projections for the country’s financial outlook. The report is available online here, and we’ll take a closer look at some of the numbers below.”
Bryce Harper wore a 'Make Baseball Fun Again' hat after the Nationals' win
USA Today | For The Win
April 4, 2016
“Harper has been outspoken in his dissatisfaction with baseball’s unwritten rules. He wants players to express themselves and have fun on the field. He is in favor of the bat flip, and bat flips are awesome. Harper 2016.”
MAP: The Ramones' New York
DNAinfo
April 3, 2016
“The Queens Museum is about to unveil its tribute exhibit, "Hey! Ho! Let's Go: Ramones and the Birth of Punk" on April 10 — honoring the band's deep roots in the borough. But before Joey, Johnny, Dee Dee and Tommy Ramone — and later Marky, Richie, Elvis and CJ — took the world by storm, they got their start in Forest Hills. The original bandmates lived on Yellowstone Boulevard and wreaked havoc on Queens Boulevard, connecting at Forest Hills High School.”
The Real Deal
April 7, 2016
“For the first time in two years, the median residential rental price has decreased in the borough, according to a new report by Douglas Elliman. The median rent in March dropped to $3,300, a 2.8 percent decrease from March 2015. Over the last few months, the rate of price growth slowed, preluding a rental flatline.”
U.S. Apartment Market Shows Signs of Losing Steam
The Wall Street Journal ($)
April 7, 2016
“The apartment-rental market cooled in the first quarter, according to reports from three research companies, suggesting a six-year boom that has pushed the cost of housing to unaffordable heights in many U.S. cities might be coming to an end.”
Rogue One: A Star Wars Story (2016) Teaser Trailer
Trailer Addict
April 07, 2016
“Rogue One is about a group of rebels who set out on a mission to steal the plans for the Death Star. This is only the first teaser, so don't expect too much to be revealed, but they do show quite a bit and it looks amazing.”
Experts warn affordable housing rules will hurt development
The New York Post
April 5, 2016
“The City Council and Mayor de Blasio can high-five all they want, but real estate experts believe the new Mandatory Inclusionary Housing (MIH) policies that require affordable units to be interspersed throughout buildings — while so far, not providing any real estate tax breaks in return for the lower rents — will put a damper on development.”
Will Rising U.S. Debt Levels Keep the Fed On Hold?
Charles Schwab
April 4, 2016
“The national debt factors into the Fed’s decisions only insofar as it affects the economy and inflation. Otherwise, fiscal policy is in the hands of Congress. So, what do the debt dynamics look like? The Congressional Budget Office (CBO) compiles a lot of useful data on this topic. It recently released its updated 10-year projections for the country’s financial outlook. The report is available online here, and we’ll take a closer look at some of the numbers below.”
Bryce Harper wore a 'Make Baseball Fun Again' hat after the Nationals' win
USA Today | For The Win
April 4, 2016
“Harper has been outspoken in his dissatisfaction with baseball’s unwritten rules. He wants players to express themselves and have fun on the field. He is in favor of the bat flip, and bat flips are awesome. Harper 2016.”
MAP: The Ramones' New York
DNAinfo
April 3, 2016
“The Queens Museum is about to unveil its tribute exhibit, "Hey! Ho! Let's Go: Ramones and the Birth of Punk" on April 10 — honoring the band's deep roots in the borough. But before Joey, Johnny, Dee Dee and Tommy Ramone — and later Marky, Richie, Elvis and CJ — took the world by storm, they got their start in Forest Hills. The original bandmates lived on Yellowstone Boulevard and wreaked havoc on Queens Boulevard, connecting at Forest Hills High School.”
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