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Peering Into 2012 with Freddie Mac
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Las Vegas Occupancy Corner
page 8 5 Best Cities for Landlords
Stellar Apartment Market Fundamentals to Continue to Draw Investors Attention Driven by low vacancy and the shift toward renting versus buying homes, the fully recovered apartment sector is poised for a development spike in 2012, according to PricewaterhouseCoopers’ 4Q11 PwC Real Estate Investor Survey. In addition, low interest rates and the availability of construction financing are creating incentive for developers who’ve been waiting on the sidelines since the market downturn, according to the report. “Surveyed investors continue to view the apartment sector as an attractive play in delivering steady cash flows driven by solid rental demand and rising rents,” said Susan Smith, editor in chief of PwC’s quarterly survey. “As a result, investors view this sector as a hotbed for further investment activity. While government-sponsored entities Fannie Mae and Freddie Mac have historically propelled sales activity in this sector as the primary sources of debt, stellar apartment market fundamentals are attracting debt capital from other sources, such as banks and life companies, increasing the competitiveness among lenders and buyers.” Despite the uncertainty of the U.S. economy, the majority of PwC’s survey respondents “view commercial real estate as favorably priced,” said Mitch Roschelle, a partner in PwC’s U.S. real estate advisory practice. “Looking ahead to 2012, our report suggests that investing in U.S. commercial real estate is an attractive play and will gain increasing global attention due to its hard asset nature and current income-producing characteristic, along with its total return potential.” The PwC Real Estate Investor Survey is widely recognized as an authoritative source for capitalization and discount rates, cash flow assumptions, and actual criteria of active investors, as well as property market information. If you are interested in purchasing the PwC Real Estate Investor Survey please call 800.654.3387.
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January | February | March 2012
Quiet Your Inner Armageddon, 2012 Looks Very Promising for the Apartment Industry Rents are not cooling, are apartments still the best investment play? We dive into industry specific areas, head first, for answers. What does the future hold for builders and real estate professionals in 2012? More of the same gloom and doom, as predicted by the truncated Maya calendar, or a gradual improvement in the markets? We’ve compiled a list of predictions from across the industry that should quiet your inner Armageddon. Markets The number of improving housing markets continued to expand for a fourth consecutive month in December, rising from 30 to 41 on the latest National Association of Home Builders/First American Improving Markets Index. The financial community offers a more subdued view. The housing market is unlikely to return to health before 2016, according to economists surveyed by The Wall Street Journal. Respondents expect home prices to inch up in 2012 but don’t see them outpacing inflation over the next three years. Home Prices Analysts at Goldman Sachs predict that the national S&P/ Case-Shiller home price index will fall another 2.5 percent before it bottoms next summer, according to the Wall Street Journal. Others are less optimistic. CoreLogic’s chief economist Mark Fleming said his company forecasts “indicate flat growth through 2013.” A pair of experts -Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch, and Laurie Goodman, an analyst at Amherst Securities Group -- told Bloomberg they think the shadow inventory of foreclosed and REO properties will push existing home prices down another 6-8 percent. Barron’s commentary? “The enormous supply overhang of existing homes (particularly factoring in all in foreclosure or soon to be) promises to keep pressure on prices. We look for further declines to be registered in the quarters ahead, although in all likelihood the rate of deterioration will be nowhere near as steep as that recorded earlier in the cycle.” Regional Differences When it comes to the recovery outlook it’s a regional story. In bellwether Florida, sales are climbing and inventories starting to fall. Agents are beginning to see multiple offers on homes, according to Florida Realtors Chief Economist Dr. John Tuccillo. Economist Lawrence Yun with the National Association of Realtors confirmed the anecdotal evidence. “Buyers have stepped back into the Florida market.” In hard-hit California it’s a slightly different story. A recovery is taking hold, just not very fast. Forecasters at Chapman University predict that Orange County home prices will stop falling in 2011 but stagnate in 2012. “Our forecast calls for the median selling price of a single-family unit (to) remain flat in Orange County in 2012” after a 5.1 percent drop in 2011, according to the school’s A. Gary Anderson Center for Economic Research. For the rest of California prices are projected to drop 5.9 percent in 2011 and another 2.5 percent in 2012. In the Phoenix area home building has slowed so much that anything looks like up. In 2011 homebuilders were on track to sell about 7,000 homes, a drop of about 500 sales from 2010 and nothing like the go-go years before 2006 when builders sold about 60,000 units, according to Jim Belfiore, a home-building analyst based in Phoenix. That may change as competition from existing homes dwindles. In November 2011 there were about 27,200 Phoenix-area homes listed for sale, a decline of more than 40 percent from
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3 November 2010, according to Cromford Associates, a housing-market analysis firm based in Mesa. Builders think the trend will continue but that their market won’t recover until 2013. Mortgages Delinquencies TransUnion predicts that the delinquency rate will rise to about 6 percent in early 2012. (The delinquency rate is the ratio of borrowers who are 60 or more days behind on their payments.) The credit-ratings agency predicts the rate will drop by 5 percent by the end of the year.
improved in the third quarter for market-rate rental properties and for-sale properties, up to 67.2 and 37.3, respectively. Expectations for low-rent units decreased slightly, to 50.2. The figures were released by the National Association of Home Builders in early December. Rents The National Association of Realtors reported that rents rose at a better than 3 percent annualized rate in the third quarter of 2011. Private data sources imply even faster rent growth. “Nor is there any reason to believe this rent growth will cool, given the favorable demographics of a rising number of young adults over the next 20 years, a high number of owners of foreclosed homes who can’t buy in the near term, and the low construction rate of apartments,” NAR reported. “If annual rent gains stay near 3.5 percent, rents will double in 20 years.” Remodeling Lowe’s Companies expects sales to increase 2-3 percent over 2010 numbers. Others don’t view figures like that as indicating an uptick in remodeling activity.
Homebuilders When Toll Brothers announced its fourth quarter and fiscal year 2011 earnings in early December analysts applauded the numbers. At earnings per share of $0.09 (including charges), Toll Brothers beat some analyst expectations by nearly a nickel a share. Many praised the company for improving gross and operating margins. “Most of them see Toll as highly likely to exceed its own guidance for 2012, barring further disruption in the macroeconomic market or local dislocations,” Big Builder Online reported. Apartments The Multifamily Production Index (MPI) shows continued improvement for the fifth consecutive quarter for the apartment and condominium housing market. The index, which tracks the sentiment of builders and developers about the conditions of the multifamily market on a scale of 0 to 100, increased from 44.4 in the second quarter to 47.3 in the third quarter, the highest reading since the fourth quarter of 2005. Looking forward to the next six months, builder and developer expectations
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Home improvement spending will remain tepid through the first half of 2012, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. Program Director Kermit Baker doesn’t see a recovery in the remodeling industry until there’s a recovery in consumer confidence and the housing market.
believes the worst days of the downturn are over. They also are realistic enough to know challenges still lie ahead.” Manufacturing Speaking before the annual conference of the Association of Independent Manufacturers’ / Representatives (AIM/R), Alan Guidish, a principal of the Institute for Trend Research, said he sees improvements in housing, lending, liquidity and employment. “We’re on our way to recovery,” he told Editorial Director Mary Jo Martin in the November 2011 issue of The Wholesaler. Design While not in itself a macroeconomic trend, design plays such an important part on the housing market that we’ll end with a prediction from Builder magazine (“10 Lifestyle Trends to Watch For in 2012”). The trend toward smaller homes has been forecast for years. But the publication puts some research behind this prediction. “According to the Urban Land Institute, boomers and their children, Generation Y, make up half the country’s population. Both those groups are positioned to be looking for something on the small side. Projections from the Harvard Joint Center for Housing Studies indicate that persons living alone will make up the largest share of household growth for the foreseeable future.”
Flooring Tile consumption has increased for the first time in four years. According to U.S. Census Bureau figures, tile consumption in 2010 reached 2 billion square feet, up 7.7 percent from 2009, Tile magazine reported. “Through 2Q 2011 YTD, U.S. tile consumption was at 1.04 billion square feet, which represented a 1.9 percent increase versus 2Q 2010 YTD.” Plumbing Writing in Supply House Times, Bob Miodonski said participants at the American Supply Association’s fall convention in Las Vegas, Nevada were modestly bullish on a recovery in the housing market. Speaking about the wholesale segment, Midonski noted that “Everyone I spoke with in Las Vegas
Maybe big things like a recovery really do come in small packages. Written By: Jeff Widmer and digested from “Will 2012 mark the end of the world or the end of the housing recession?” (the builder buzz)
January | February | March 2012
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Peering Into 2012 Looking through the eyes of Freddie Mac’s Chief Economist, Frank E. Nothaft. With the New Year already here, ‘tis the season to assess the 2012 outlook for the macroeconomy and housing market. Here are five items from our crystal ball: First, economic growth will likely strengthen to about 2.5 percent in 2012. U.S. economic growth appears to have accelerated in the waning months of 2011,
with fourth quarter growth expected to come in around 2.5 to 3.0 percent, annualized, by most forecasters. Evidence to support the pick-up were stronger retail sales, low inventory levels, and a 477,000 three-month gain in private non-farm payroll employment from August through November. Given the anemic 1.2 percent annualized growth over the first three quarters of the year, the final quarter could provide some needed momentum as we head into 2012. Residential fixed investment, which has been lackluster over the past couple of years, will likely contribute modestly to 2012 growth. New construction, including 4
January | February | March 2012 additions and alterations to the existing housing stock, is the main component of residential investment, and there are signs it may (finally) be turning up, albeit gradually. Single-family housing starts will likely remain weak, but new multifamily starts have already gained and will help drive residential investment expenditures in the New Year. Second, the U.S. unemployment rate will decline but likely remain above 8 percent. The drop in the unemployment rate from 9.0 percent to 8.6 percent in November was welcome news, although roughly
to do with sluggish labor force growth. Discouraged workers are one part of this equation, and they will likely come back into the labor market if economic growth strengthens and firms hire at a more brisk pace. This scenario means stronger job growth in 2012, which appears likely, though it may not put much of a dent in the nation’s unemployment rate. The path over the year may have a couple upticks in the reported unemployment rate before modest declines bring it lower in the latter half of next year, ending 2012 below November 2011’s level but still uncomfortably above 8 percent. Third, mortgage rates will likely remain very low, at least through mid-2012. Thirty-year fixed-rate conforming mortgages have hovered around 4.0 percent (or lower) during the fourth quarter to-date thanks in large part to the Federal Reserve’s Maturity Extension Program and its stated intent to push and keep long-term rates low. The Program (a.k.a. “Operation Twist” by the popular press) is expected to last until mid-2012. This should keep fixed-rates for 15- through 30-year product relatively low during the first half of the year, with rates edging up during the second half. Further, the Federal Reserve’s August announcement that it was likely to maintain its current federal funds target through mid-2013 assures that initial- period interest rates for one-year and various hybrid ARMs will remain extraordinarily low throughout 2012.
one-half of the decline appears to have been discouraged workers who quit the labor force. Broader measures of labor underutilization, which include discouraged workers and part-timers who want full-time work, also moved lower in November but remain very high, at 15.6 percent. Over the twelve months ending in November, the unemployment rate dropped 1.2 percentage points -- more of a drop than would have been inferred from payroll job gains that averaged only 130,000 per month. Part of the reason that relatively modest payroll job gains have, nonetheless, pushed the unemployment rate lower has
Fourth, housing activity will be better in 2012, but not robust. A full-fledged recovery in the housing sector will likely elude the U.S. in 2012, but new construction and home sales are expected to be greater than in 2011. The rental market appears to be leading the housing recovery, as rents have risen in most markets, vacancies are down, and property values for professionally managed complexes are up in most neighborhoods. Good rental market fundamentals and a dearth of new apartment completions should translate into more starts of rental buildings with five or more units, pushing total housing starts up slightly more than 10 percent in 2012. Single-family starts may inch higher too, but no significant bounce back in single-family construction is likely in coming quarters. A strong headwind holding back new home sales is the very affordable
5 competition from existing homes. Low mortgage rates and existing house prices could lead to a bump-up in sales by three- to five-percent in 2012 over the past year’s level. While encouraging, sales volume is still low given the affordability of housing. And ample distressed sales and sluggish home- buying demand will continue to keep prices soft in many markets: We expect U.S. house price indexes to move lower before bottoming out in 2012, with modest appreciation forestalled until 2013. Still, these national indexes mask the sizable variation in local house-price performance. Some markets have appreciated over the past year and are likely to gain further in 2012, while those markets with higher vacancy rates and relatively large distressed sales will continue to see downward price pressure over the next year. Fifth, expect less single-family originations but more multifamily lending in 2012. While single-family refinance volume is currently strong, many borrowers have already locked in relatively low rates, or are constrained (because of being underwater or having late payments) thus reducing refinance activity over time. Further, somewhat higher mortgage rates in the second half of 2012 (after the expiration of ‘Operation Twist’) will reduce financial incentives to refinance. Enhancements to HARP are expected to add more than $100 billion to 2012 refinance originations, but overall refinance volume will likely be less than in 2011, so much so that it will more than offset a small incremental amount of purchase-money lending, leaving overall single-family originations lower in 2012. The better fundamentals in the rental market and pent-up demand for refinance of multifamily loans should translate into higher lending volumes in that portion of the market, driven by both more refinance and more sales transactions. Opinions, estimates, forecasts and other views contained in this document are those of Freddie Mac's Office of the Chief Economist, do not necessarily represent the views of Freddie Mac or its management, should not be construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without notice. Although the Office of the Chief Economist attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. The information is therefore provided on an "as is" basis, with no warranties of any kind whatsoever. © 2011 by Freddie Mac.
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Multifamily Investors Peg Top Five Markets for 2012 Housing trends are driving continuing interest in multifamily properties among investors, according to a 2012 outlook study by Jones Lang LaSalle and RealShare. More than 150 private investors, real estate brokers, developers, REITs, and institutional investors participated in the survey. Core assets in primary coastal markets are getting the most attention, but buyers are also looking for value-add deals and facing increased competition from foreign investors, the study found. Investors are most likely to invest in Dallas, Los Angeles, San Francisco, San Diego, and Phoenix in 2012. Bumped from the list were 2010 heavyweights New York City and Washington, D.C. Divestitures in 2012 are most likely to occur in Las Vegas, Los Angeles, Washington, D.C., Atlanta, Houstin, and Phoenix, investors say.
transit-oriented (52 percent), and suburban/garden-style (45 percent).
“Investors are most likely to invest in Dallas, Los Angeles, Phoenix, San Francisco and San Diego in 2012” “Outside of cap rates and price per unit, we’re focusing on location for our acquisitions,” said Eric Freedman of Coastline Capital Partners. “Where are the people going to be, where is the demand always going to be? Even when the market goes down, or when it goes up … if you can find a place where people want to live and work -- that’s what we’re targeting.”
“It’s clear that multifamily is the sector to watch now, and in 2012,” said Jubeen Vaghefi, managing director and leader of Jones Lang LaSalle’s multifamily investment sales team, in a statement. “During the past year, apartments have shown a vitality that’s unparalleled among the other asset classes. This survey’s results only solidify that perspective, as we watch investors chase yields in markets that previously have been under the radar.” Survey respondents said their main competition is private investors (46 percent) and institutional investors (23 percent). Foreign investors are becoming more active in select markets, said David Young, managing director and leader of Jones Lang LaSalle’s West Coast multifamily team. “They’re drawn to New York, Washington, D.C.; San Francisco, Los Angeles, and, to some extent, Seattle. Foreign investors are seeking opportunities in the cities that they know -- those that they see on the covers of magazines -- and in many cases, they’re seeking joint-venture partners to lead the way.” Properties getting the most attention, the survey found, are value-add (67 percent),
Downtown Los Angeles, California
Written By: Christine Perez and digested from “Multifamily Investors Peg Dallas as Top Five Market for 2012” (RealPoints Magazine)
January | February | March 2012
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January | February | March 2012
OCCUPANCYCORNER
Las Vegas Metro Occupancy Trends December 2010 through November 2011
92% 91% 90% 89% 88% 87% 86%
89.49%
90.69% 90.49% 90.77% 90.76% 90.51% 90.58% 90.95% 90.70% 90.21% 90.09% 90.45%
January
March
May
July
September
November
Source: Spencer Ballif and Jeff Swinger of CB Richard Ellis (Las Vegas) (115,348 Apartments Surveyed in November)
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MARKETACCESS
US Multifamily Snap Shot
Source: Fannie Mae
MULTIFAMILY MARKET COMMENTARY – DECEMBER 2011 (US OVERVIEW) According to data from Dallas-based Axiometrics, Inc., most U.S. metro areas have been experiencing strong improvement in multifamily fundamentals all year, with increasing rents, declining vacancies, and concession rates returning to normal levels (when vacancy and rent levels are close to their historical norms) as of October 2011. As seen in the chart below, the national multifamily concession rate had been falling steadily for most of the year and is currently at about -3.1 percent. A concession rate is the rent discount amount expressed as a percentage of the current asking rent calculated on an annual basis. For example, a concession rate of -8.3 percent is equal to one month of free rent on a 12-month lease. Apartment Demand Healthy - After having fallen all year, the national concession value inched up just a bit in October, to -3.1 percent from -3.0 percent in September, equal to eleven days of free rent. The cause is likely due to seasonality, since the fourth and first quarters tend to be the slowest times of the year for the multifamily sector in terms of net absorption. Many tenant households remain in place during these times of the year, with the reasons usually attributed to the holiday season and the colder weather in many parts of the country. A year-over-year comparison clearly demonstrates the strength of rental increases in 2011: Concessions stood at -4.9 percent in October 2010, compared to this year’s -3.1 percent, with the peak occurring in December 2009 at a rate of -7.6 percent. Historically, a -2.0 percent to -3.0 percent national concession rate has been acceptable. Thus, the current rate indicates a return to a healthier rental sector. Indeed, the current rate of -3.1 percent is now on par with the sector’s recent trough of -3.0 percent, which occurred in the third quarter of 2007, according to Axiometrics data. Concessions Differ by Class - Axiometrics data shows a significant difference in concession rates by class. On a national level, concessions on Class A multifamily properties are at their trough, down to just -1.9 percent, or seven days of free rent, after having peaked back in December 2009 at -6.21 percent or twenty three days of free rent. Unsurprisingly, in comparison, Class B and Class C have not performed quite as well. Class B concessions are -2.9 percent and Class C are at -5.2 percent as of October. Axiometrics defines multifamily property classes into three categories of Class A, B, and C. The methodology it employs is not based on age, as is often done in the industry, but rather is based on effective rents, both on a metro and submarket level. Axiometrics believes this methodology provides a clearer picture of the property type class, since older properties in certain metro areas, such as New York City, would still be considered Class A properties, which is reflected in the rent levels. A Healthy 2012 with Stabilizing Rents - While the strength of improving vacancy levels and rental rates will vary by metro, on a national basis the multifamily sector should remain on track into early next year. Although rent growth will vary greatly by metro, on a national basis it will likely come in at around 4.0 percent for 2011, as seen in the table above. Despite the slowdown in job growth, we expect multifamily demand to remain solid in 2012 as well, thanks to limited new rental supply coming online during the near-term. As a result, the outlook remains positive for the multifamily sector. Based on current observations, it appears likely that average asking rents on a national basis could experience an annualized increase of between 2.0 percent and 3.0 percent in 2012.
Access Investment Offerings ASKING PRICE
PER UNIT PRICE
Inspirado (252)
COMMUNITY (UNITS)
$ 30,000,000
$ 119,048
NAI Sauter Companies / 702.383.3383
BROKER / CONTACT INFORMATION
Universe Sunrise Mountain (344)
$ 25,500,000
$ 74,128
Hendricks & Partners / 702.866.6239
Aldonsa (80)
$ 2,750,000
$ 34,375
Hendricks & Partners / 702.866.6239
Desert Rose (237)
$ 2,700,000
$ 11,392
NAI Sauter Companies / 702.383.3383
Studio Plaza (75)
$ 1,225,000
$ 16,333
Odyssey Realty / 702.644.5824
Access Recent Transactions CLOSING PRICE
PER UNIT PRICE
Greenville Park (426)
COMMUNITY (UNITS)
$ 8,500,000
$ 19,953
CLOSING DATE
BUYER
Suncrest (78)
$ 8,000,000
$ 102,564
October 31, 2011
RK Properties
Cheyenne Woods (160)
$ 4,500,000
$ 28,125
October 18, 2011
Strategic Realty Capital
Regency Place (137)
$ 3,700,000
$ 27,007
October 13, 2011
3 D Investments
Fountains at Flamingo (524)
$ 32,500,000
$ 62,023
October 10, 2011
Alliance Residential
November 22, 2011 Westland Housing
For additional information and / or broker information on Access Investment Offerings and / or Access Recent Transactions contact Bret Holmes at 702.699.9261.
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January | February | March 2012
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January | February | March 2012
INVESTORINSIGHT 5 Best Cities for Landlords
The multiple for Las Vegas is the nation's lowest: a low-ball six, which means that housing prices are only six times annual rents.
San Jose's economy has added jobs every month since June 2010 (following 21 straight months of job losses), and this is expected to continue.
Three important factors makes these metro areas very attractive to investors.
Vacancy Rate: Economy:
Highest Projected Growth: Phoenix, Arizona
If you're thinking about becoming a landlord (or already are one), understand that not all cities will be good for your business. There are three main criteria you'll want to consider when choosing where to buy your rental community: 1) Price vs. income. Towns with cheaper home prices and more expensive rents offer a greater opportunity to make money. These areas are most often found where the foreclosure crisis hit the hardest -places like Las Vegas and Fresno.
8.6% 14.2% Unemployment
The Las Vegas economy depends on tourism and is not expected to rebound until the rest of the country's recovery is well under way. Population is expected to nearly double in the next decade due to rising Hispanic demographic and continuing south and westward migration of Americans.
The Wharton School's vaunted population forecast predicts Maricopa County will experience more growth than any metro area in the decade ending in 2020, making Phoenix a hot market for rental property.
2) The desirability of the area. Schools, culture, jobs and recreation opportunities all attract people from elsewhere, and these people need somewhere to live. 3) Population and economic trends. Good rental income now is nice, but if you're concerned about the future of your investment, you need to think long-term. Is the population growing? Is the economy improving? We have chosen standout cities of varying sizes in all U.S. regions. Take a look at some likely locations for your next real estate investment. Most Bang for Your Buck (Again ...): Las Vegas, Nevada Many who doubled down on this city's housing market folded and became renters. Could the Las Vegas pain be an investor's gain? "It's not just low rents and vacancy that matter, it's the purchase-price-to-annualrent ratio, which is called a multiple," says Seth Rabinowitz, executive and lead consultant for management consulting firm Silicon Associates in Beverly Hills, Calif. "Cities with the highest multiples are the worst investments and the lowest multiples are the best investments."
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"In addition to low vacancy rates and high rents, population growth is a critical factor to ensure consistent tenancy and long-term rent growth. Because of this we target states in the sunbelt such as Florida and Tennessee," says Ryan Hinricher, senior housing analyst and portfolio manager for Investor Nation, a real estate investment company.
In addition, Phoenix enjoys one of the lowest price-to-rent multiples. Property prices run only about seven times annual rents, which makes rentals in Phoenix nearly as cheap as those in Las Vegas. Steepest rent increases: San Jose, California Rabinowitz recommends that you consider the future demand for your rentals before buying them. "It's not just low rents and vacancy that matter, it's the direction of the rents -- are they heading up or down?" Silicon Valley rents are emphatically heading the right direction -- its landlords collected the highest rent hikes in the nation between May 2010 and May 2011 -- a 9.5 percent jump overall, with some communities' rents skyrocketing by nearly 20 percent! In addition, the vacancy rate in the Silicon Valley is among the lowest in the country. Vacancy Rate: Economy:
2.6% 10.4% Unemployment.
However, the area experienced the largest year-over-year percentage increases in employment in large metropolitan areas according to the Bureau of Labor Statistics.
Vacancy rate: Economy:
7.3% 8.7% Unemployment (and it's improving).
Data from the Bureau of Economic Analysis show a healthy 5.4 percent year-over-year growth. Housing prices appear to have bottomed out, dropping to $126,000 from $126,700 between the first and second quarters of 2011. Most Attractive to Job Seekers: Minneapolis, Minnesota Why do you want to invest in a town attractive to job seekers? "People often rent when they first move to a new city," explains Todd Huettner of Huettner Capital in Denver, Colorado. He recommends targeting locations with younger populations ("younger people rent") and a diverse economy. Realtor Ryan Halset of Boardwalk Real Estate in Seattle, Wash., agrees. "When assisting investors in evaluating property
9 scene, good schools and tons of green space. Why should you buy a rental in a livable city? Rabinowitz says, "It's always comforting to know that you could move into your investment property one day if necessary or because you choose to." Vacancy: Economy: for rental, one of the primary indicators we evaluate is the proximity to major job centers," he says. Minneapolis, delivers on both requirements, according to Apartments.com, and is a top city on its "Best Cities for Recent College Graduates" list. Its rents are increasing and its vacancy rate is as low as they go. Vacancy rate: Economy:
2.6% 7.5% Unemployment.
The top employers come from diverse industries and include U.S. Bank, 3M, Land O'Lakes, Target and United Healthcare. Minneapolis's already solid economy is getting even better, according to the Federal Reserve. It recently reported that the unemployment rate "is expected to drop to 6.2 percent by the end of 2012. Gains in personal income are also expected." If you prefer warmer climes, don't worry, these other cities also made Apartment.com's list: Denver, Colorado Atlanta, Georgia Washington, D.C. St. Louis, Missouri Most Livable: Raleigh, North Carolina Tops on Business Week's list of "America's Best Cities," Raleigh's low vacancy rate and growing rents are no surprise. The mainstay of the so-called Research Triangle, Raleigh is home to North Carolina State University, Duke University and the University of North Carolina at Chapel Hill. The city boasts 867 restaurants, 110 bars and 51 museums, and offers a lively social
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5.% 8.4% Unemployment.
Education, defense technology, biotechnology, and life sciences sectors and emerging clean tech and smart grid industries have bolstered the local economy. Wake County is projected to be the 25th-fastest-growing population in the U.S. Its population is expected to get a bit younger over the next decade. Forbes ranks it second in its list "Best Cities for Young Adults." Today's economic forces are opening up many opportunities for investors in residential real estate. Finding a good income property in any of these areas shouldn't be too difficult. Sources: - Vacancy data and rent increase data from Axiometrics (Apartment Market Performance May 2011) - Employment data from the US Bureau of Labor Statistics (Metropolitan Area Employment and Unemployment Summary) - Housing price data provided by Standard and Poor's Case-Shiller Home Price Indices September 27, 2011 - Best Cities data provided by Bloomberg Business Week (Which is America's Best City?) - Population projections from University of Pennsylvania's Wharton School (Forecasting 2020 U.S. County and MSA Populations) - Economic data provided by US Department of Labor Statistics Economy at a Glance
Lenders Want to Lend to Multifamily Today, but Will They Feel the Same in Two Years? Investors do not seem worried How much longer can the multifamily market enjoy the extremely low interest rates? To what extent have underwriting
been tightened as a result of the domestic and global economic uncertainty and turmoil? These are some of the questions addressed at the Massey Knakel Multifamily Summit. Senior debt and structured finance capital providers brushed aside any significant concerns about economic and financial troubles on the international stage and affirmed their interests in lending to the multifamily market, especially in New York City. Fannie Mae “loves the fundamentals and long-term outlook” of the apartment sector, said Hilary Provinse, vice president‑multifamily lending, at Fannie Mae. Apartment “fundamentals are very strong” and “seem to be getting stronger,” agreed Melissa Farrell, principal at Prudential Commercial Mortgage. “We love the multifamily business,” said Robert Akalski, senior vice president of Capital One. Akalski said that New York City is the “number one” market, and that the company is also seeking to lend in the boroughs outside Manhattan. Indeed, the global turmoil may have a positive effect on business. The “hesitancy and confusion” in the markets creates “an opportunity for us,” said Richard Wolf, senior managing director of Greystone. Although it may be clear skies ahead for multifamily fundamentals given the continuing limitations on new construction, there may be some clouds on the horizon as regards borrowers’ abilities to refinance in the next few years. Provinse noted that the volume of maturities on Fannie Mae and CMBS books will hit a high in 2013. “We are relying on low interest rates” as the peak maturities occur, suggested Provinse. If interest rates are not low then, “we see larger problems happening.” However, she said Fannie Mae is counting on interest rates remaining relatively favorable. Provinse and some of the panelists agreed that the “extremely low” interest rate environment will last one to two years more. Written By: Keet Fong and digested from “Lenders Want to Lend to Multifamily Today, but Will They Feel the Same in Two Years?” (Multi-Housing News)
January | February | March 2012
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LOCALEFFECTS Turnaround Looking More Positive for Las Vegas Las Vegas was one of the hardest hit American states and had the highest mortgage default rates for 22 months in a row. While house prices have declined by a massive 60% from their 2006 highs, there are finally signs that the property market may be on the verge of recovery. Even though it is a bit of a risk many overseas buyers are being tempted by the bargain prices. According to data from the National Association of Realtors, by the end of September 36,000 homes had been sold. This is an 11% increase on 2010, which has helped to reduce the inventory of unsold homes in the region, with just 10,000 currently listed, which is around 2 months supply. Nobody is expecting a quick recovery, but experts do think the market may finally be close to the bottom.
the period. At the moment homes in Las Vegas are around 30% cheaper than the national average, and prices aren't yet rising substantially due to the high number of foreclosures, but with the improvements in the local economy buyers are choosing to purchase affordable properties before the recovery really picks up pace. Last month sales increased by 20% compared to October 2010.
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"They spend less on gaming, more on other things. We're seeing a shift of Las Vegas becoming more of an event destination," Brown said.
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Recovery will remain slow in sectors such as real estate and construction, with construction moving sideways, or going up and down from month to month. That's a good indication it's at the bottom of the cycle, the economist said.
Vegas Economy Seen in First Recovery Stage
The Case-Shiller Home Price Index and data from Las Vegas-based Home Builders Research show home prices continuing to drop. That's troubling, Brown said.
Southern Nevada's economy is in the initial stages of recovery and will be much better next year, UNLV economist Stephen Brown stated.
However, the erosion of housing prices -which is happening nationwide -- will end next year and that will boost consumer confidence.
Recovery that began this year will continue, but probably at a slower pace than the overall U.S. economy, the director of the Center for Business and Economic Research told about 300 business leaders meeting at M Resort.
What will help Southern Nevada's recovery is a stronger U.S. economy, Brown said.
Written By: Michael Fazio, publisher of
He's forecasting growth in every economic indicator series in 2012, led by a 5.1 percent increase in visitor volume and 4 percent increase in gaming revenue and housing permits. Employment and population growth will remain under 1 percent, as it was in 2011.
Las Vegas continues to be very attractive to visitors, according to the latest data 3.3 million people visited the city in September alone. This growth in investment is fueling growth in the labor market, particularly in the services and retail sectors which grew by 5.5% in the year ending September 2011. This growth helped to fuel a 2% decline in unemployment in the region, which is one of the biggest falls seen across all US metropolitan areas during
visitor. They're coming from farther away and they're staying longer, but they're gambling less.
"We consolidated our losses and started growing in 2011, and in 2012 and 2013, we'll see the fruits of that growth," Brown said. "What we're seeing is not only the end of declines, but we're beginning to see growth here in Southern Nevada." Tourism is definitely showing an upward trend. After suffering some down years, visitor volume has rebounded to 2007 levels and hotel occupancy has climbed above 85 percent, though average room rates have fallen 25 percent to 30 percent since 2007, Brown noted. Today's visitor profile differs from 2007's
The Western Blue Chip Economic Forecast shows employment and income growth in all Western states for 2012, led by Utah's 3 percent employment growth and better than 5 percent income growth. CBER's Business Confidence Index topped 100 for the first time in 2011, though "financial headwinds" preventing many smaller firms from getting credit and holding back economic expansion in Southern Nevada, Brown said. Asked about a "jobless recovery" during a question-and-answer period, Brown responded that the nation and Southern Nevada are "not technically" in a jobless recovery because jobs are being created in sectors of the economy that are expanding. "We're not seeing it in construction, but we are seeing it in business services and gaming," he said. Written By: Hubble Smith and digested from “Southern Nevada economy seen in first recovery stage� (Las Vegas Review-Journal)
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MANAGEMENTMINUTE The Service of Retaining Your Residents Keeping residents help reduce turnover costs and increase your bottom line While the number of renters in the market has increased in the last few years, retaining good tenants can still pose a problem for property managers. Maintaining a current resident is much less expensive than locating, approving, and moving in a new tenant. Of course the nature of renting itself is often transient; many people rent while looking for a home to buy, others only in the community for a short period of time. But there are a select group of tenants that would be more than happy to stay in the community where they rent; provided that they’re happy. So how do you make…and keep your tenants happy? Perhaps most important is good customer service. Most people, by nature, do not really enjoy moving frequently and will likely find reasons to stay where they are, providing that they receive the following: Great Staff Responsiveness Do you always respond promptly to tenant requests? Are maintenance issues resolved quickly and professionally? Are complaints or other issues handled properly, or are they just put aside? These are all important issues and tenants will
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remember how they are handled (or not handled) at renewal time. Maintaining the Look / Quality of the Community Obviously, your properties should be maintained anyway, but many tenants that do become dissatisfied with their apartment home cite issues such as “the property went downhill.” While not very descriptive, this can mean anything from neglected landscaping, trash scattered throughout the property, or becoming careless about whom you rent to. Tenants think of their apartment as their home, and coming home to suspicious characters hanging out in the parking lot, or trash blowing around in the wind will make a tenant seriously consider moving come renewal time.
can share with your tenants? A monthly newsletter, holiday wine & cheese parties, an annual property yard sale, all of these things help to create a feeling of community, and that can be potent.
Keep Residents Informed and Involved What’s going on in the community that you
Written By: Mary Girsch-Bock and digested from “Retaining Residents” (PropertyManager.coml)
Consistency in Staffing While a change of staff cannot always be prevented, it’s important to maintain some consistency in the rental office. Tenants often become very attached to office personnel, and frequent staff turnover may not only affect property performance, but tenant turnover as well. While there will always be tenant turnover, building and maintaining a solid community will help you maintain more of your tenants come renewal time.
January | February | March 2012
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January | February | March 2012
Choosing The Right Property Management Company for Your Asset Don’t you want your asset to be Advanced? Choosing the right property management company from among the dozens in your area can seem like a daunting task. But with some careful planning and good interviewing techniques, you'll be well on your way to turning the complex, time-consuming job of managing your rental asset into a passive revenue stream. Before deciding which companies to put on your short list, sit down and identify your needs and goals for the property in question. Do you need Advanced property management services, or do you want help with only certain aspects of your business, such as leasing? Do you need a Advanced management company who can create more value for your asset? Would you prefer to work with a hands-on company that has lots of Advanced resources and focuses on more personal attention? Once you've decided on your criteria and narrowed your search, take a closer look at your short list. Make a decision based on your most important aspects. Knowing the most Advanced attributes of your goals can lead to success. The wrong step may mean failure. It’s time for real Advancement for your asset. Get the most Advanced leadership in the industry today, contact Advanced Management Group directly at 702.699.9261. In a market that changes daily, sometimes hourly, your asset can’t afford anything less than being Advanced.
For information, article consideration and featured columns ACCESSLASVEGAS can be contacted at 702.699.9261. The publisher of this newsletter is:
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