Tag: ecomomic outlook

Net Worth Falling + 20% Down Payment = 1 Million Renters Added in 2011 #Multifamily

In yesterday’s MFE article What Does the Fed News Mean to Apartment Owners?: “the median net worth of middle class families plunged by 39 percent in just three years.

The Fed used a hypothetical family with $126,400 in 2007 to prove that point. In 2010, that same family’s net worth dropped to $77,300. Median family income also fell—from $49,600 in 2007 to $45,800 in 2010. The number comes from the Fed’s Survey of Consumer Finances, due out this coming Monday.”

Then in a WSJ article Why Housing Affordability Is a Mirage: “Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago… the total cost of homeownership, as a share of a borrower’s income Continue reading Net Worth Falling + 20% Down Payment = 1 Million Renters Added in 2011 #Multifamily

Is now a good time to make Apartment Building Investments?

MHN Online has an interview with Dean Henry, president of Legacy Partners Residential, one of the big apartment building investment trusts (REITs). What I like is that he speaks in bullet points, just the way I think! Here’s my exec sum (in bullet points) of his bullet points:

Now is the time for Apartment Building Investment

“There are several important reasons why now is a great time to acquire existing multifamily assets. Let’s start with demand and supply:

Apartment building investments good for the ‘Age of Deleveraging’ Says author Gary Shilling.

Apartment building investments are a top choice according to Gary Shilling, one of the world’s foremost economic forecasters, a long-time Forbes columnist, publisher of Insight Newsletter with his editor Fred Rossi, and author of “The Age of Deleveraging,” (http://amzn.to/L9hm7W on Amazon) the perfect playbook for America’s new Age of Austerity.

apartment building investing for the age of deleveraging

Quoted in the Market Watch post:

Rental apartments. A huge inventory still overhangs the housing market as prices continue falling. The American dream of homeownership may be history. Renting is the affordable option. And with REIT prices running high, “direct ownership of rental apartments may still be attractive.”

See the whole post for more ideas for investing in these turbulent times.

Apartment building owners benefit from prime renter group ‘unbundling’, driving rents and occupancy.

The recovery from the ‘Great Recession’ has been anything but slow for apartment building investment. During the recession many of the prime renters (age 20 t0 34) were hit hard by unemployment and m0ved back in with their parents. Others ‘bundled up’ by moving in with their friends.

“Sometime between 2010 and 2011 the number of doubled-up households started to decrease. This reversal released a great deal of pent-up demand for apartments. A greater number of people sharing multi-bedroom apartment units, as well as a greater number of young adults living at home, were able to move out and rent their own units. Moreover, these young adults largely did not purchase homes.”

After being hit hard by the recession, younger workers have benefited more than others from the recovery in hiring. Since the bottom  in late 2009/10,  the prime age cohort for rental apartments (ages of 20 and 34) has a net gain of more than 1.5 million jobs. This has enabled many of these young workers to move into their own apartments.

But will it continue?

“The 2010 decennial census estimates that roughly Continue reading Apartment building owners benefit from prime renter group ‘unbundling’, driving rents and occupancy.

Freddie Mac sees strong apartment rental growth next five years in valuation report.

A very interesting report on apartment building investment posted on the Freddie Mac website discussing Current Multifamily Values & Cap Rates In Historical Context explores where the market is today and where it is likely to be in five years under a number of different interest rate scenarios. Freddie doesn’t do loans smaller than $5 million (implying a minimum deal size of $6.6-7 million) and many of their borrowers are large institutional investors but the forecasting methods and valuation models they use are applicable to apartment building investing on any scale.

Apartment building investment values and cap rates

Some takeaways from the report:

Rental growth rates are expected to be Continue reading Freddie Mac sees strong apartment rental growth next five years in valuation report.

Q2 Local Metro Apartment Building Investment Reports Now Posted.

M&M tracks 40 metro apartment investment markets and delivers quarterly reports on occupancy, rents, absorption, new construction and permits (See list below). You may have to register with them to access the reports.

Apartment Building Construction Trends in Phoenix Q2 2012
Apartment Construction Trends for Phoenix Q2 2012

If you have questions about a specific market Continue reading Q2 Local Metro Apartment Building Investment Reports Now Posted.

Portland Apartment Market to add 31,000 jobs this year, vacancy to fall below 3%.

As the next building cycle for the Portland area is still another year out, vacancy rates are expected to fall to historic lows across the metro. The overall vacancy rate will match the lowest on record at 2.7 percent, while the area’s lower-tier vacancy will fall to as low as 2 percent.

Marcus & Millichap notes that a lack of multifamily construction and the expansion of jobs in the region will be the prime factors behind the extraordinarily high rates of occupancy. Job growth is expected to rise 3.1 percent—from 20,500 positions created in 2011 to 31,000 positions created in 2012. Of particular significance will be the development of a new Intel facility, which is expected to create thousands of construction jobs and spur large demand for Class B and C apartments.

Portland Apartment Building Investment, less than 3% vacancy

Cap rates for trophy buildings are likely to average in the high 4-percent range, with Class A and B assets in Continue reading Portland Apartment Market to add 31,000 jobs this year, vacancy to fall below 3%.

Denver Job Growth catching up with Apartment Building occupancy and rent gains.

Apartment building investment buoyed by job growth in Denver

Video via Property Management Insider: http://youtu.be/uFjpYSbVdRg

Apartment fundamentals are strong essentially across the board in Denver, which ranked among the nation’s best with year-over-year rent growth of 6.5%

M&M Apartment Building Investment call: Opportunities exist in secondary mkts & value add, tertiary still lagging

Marcus & Millichap Q1 call on the apartment building investment climate this morning:

  • Year over year manufacturing jobs grew 238k. Manufacturing = 20% of GDP but gets no press, where as single family housing < 2% gets all the coverage.
  • There is a historic % of 18-34 Y/Os still living ‘with the parents’ but they are also getting a larger proportion of the new jobs. (See chart) Good for apartment building investors as these people typically become renters when they do move out.

pent up apartment building demand