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SPECIAL REPORT: Housing Crisis Benefits And Cripples Renters, Multi-Family Owners Shadow Renters Face Unforeseen Evictions, Forced To Jump To Professionally Managed Apartments Source: Stephanie Armour, USA TODAY
SPECIAL REPORT (PART 1) BENEFITS: Multi-Family Owners CRIPPLES: Renters On a chilly night after work last November, Chris and Jenell Chow relaxed, watching the evening news while their children scampered around their rented two-story stucco home. Someone knocked at the door. An officer was standing on the doorstep, eviction papers in hand. That's when the Chows learned that the North Las Vegas home they'd rented for two years was in default. They had 30 days to move out and find a new home for their five children, Jenell's live-in mother, their two black Labs and a cat. The stress was severe: Jenell says she suffered a miscarriage the day before they moved out. "We felt dumbfounded," says Jenell, a stay-at-home mom. She and her husband, an electrician, lost their $5,000 rental deposit. "We would have been homeless if someone from our church hadn't loaned us money for a deposit on another place. I believe the stress caused my miscarriage." The most brutal real estate slump in decades is reverberating through the rental market. Renters in properties that are being foreclosed on are being evicted. Homeowners forced into foreclosure are becoming tenants again and driving up rents. And renters not yet ready to buy a home -- shut out by stricter lending rules or hoping to buy after prices fall still further -- are creating a dynamic shift: Even as real estate is sputtering, the rental market is surging. Rents, in fact, are accelerating in many markets across the USA. Vacancy rates are down from last year, and average rent is projected to rise 5.3% in 2008, up from a 3.1% increase in 2007, according to the National Association of Realtors. In some cities, rents are climbing at a double-digit clip. In San Francisco, the median rent rose 14.6%, to $1,810 a month in the first quarter this year compared with a year earlier, according to an analysis by Newton, Massachusetts based Investment Instruments. The median rent in Seattle rose 10.3%, to $1,211, in the same period. In Washington, D.C., the median rent rose nearly 5%, to $1,687. And in 2007, the number of renters in
professionally managed apartments leapt by the largest amount since 2000, according to the National Multi-Housing Council's March report. That increase was as large as the increase for the previous five years combined. From 2004 through 2006, 1.2 million households joined the ranks of renters, more than making up for the loss in renter households sustained from 2002 to 2004. "The rental market is now very, very strong," says Allison Atsiknoudas, CEO and co-founder of Investment Instruments, which provides Web-based tools for the real estate industry and tracks rental market rates. "It's stable. The increasing number of foreclosures in the market has definitely increased demand for rentals." High Demand, Rising Rents The health of the rental market is critical for several reasons. Rising demand for rentals can spur construction of apartment buildings, a trend that's already occurring in some metro markets. And the need for more rental properties can energize urban development, because higher commuting costs have translated into growing demand for rentals that are near urban employment centers rather than in outlying suburbs.
â&#x20AC;&#x153;The rental market is now very, very strong. It's stable. The increasing number of foreclosures in the market has definitely increased demand for rentals.â&#x20AC;? - ALLISON ATSIKNOUDAS, INVESTMENT INSTRUMENTS
"In some areas, because the demand for rentals is happening closer to cities and job markets, there will ultimately be demand for new construction," says Peter Chinloy, a real estate professor at American University's Kogod School of Business. "As rents keep rising, there is more demand, although it also means it's harder to find rental units." Escalating demand also means steeper rents. The median asking rate for rentals has jumped 14%, from $591 a month during the fourth quarter of 2003 to $673 a month in 2007, according to the Census Bureau. The national vacancy rate for rental
housing was 9.6% in the fourth quarter of 2007, down from 10.2% in the fourth quarter of 2003.
Lenders have turned more cautious for good reason: Foreclosures are up, and each of them costs lenders an estimated $50,000, on average, in processing fees, liquidation-sale price cuts and other costs, according to the Center for Responsible Lending.
Median rent for the first quarter of 2008 in 12 major metropolitan areas:Â "We've seen demand for rental housing go up," says Mark Obrinsky, chief Atlanta: $ 986 economist at the National Multi Housing Council. "The ownership side is Austin: $ 907 retrenching, and we're seeing the Boston: $ 1,645 demand going to the rental side. There's Chicago: $ 1,355 a lot of hesitancy to buy. Others can't get Las Vegas: $ 1,056 (financing), so they're remaining renters Los Angeles: $ 1,699 longer." Miami: $ 1,368 New York: $ 1,751 3) A steep rise in foreclosures. Phoenix: $ 939 San Francisco: $ 1,810 Foreclosure filings -- default notices, Seattle: $ 1,211 auction sale notices and bank Washington: $ 1,687 repossessions -- were reported on All Metro Areas: $ 1,368 223,651 U.S. properties during February, a 4% drop from the previous month but still a nearly 60% increase from February Source: Rent-O-Meter 2007. One in every 557 U.S. households received a foreclosure filing during the month, according to RealtyTrac. Several factors are driving up demand for rentals: Brannon Cox, 26, and his wife, Sarah, 27, of Flower Mound, Texas, were living 1) Renters are waiting for home in a small starter home they bought in prices to drop. 2004 for $125,000 with no money down; 80% of their loan was a two-year As they watch real estate prices slide, many renters have decided to wait longer adjustable-rate mortgage. Cox, a graphic to buy because they think prices have yet designer who then brought home about $2,500 month, soon recognized that his to hit bottom. Kevin Merrett, 23, of pay wasn't enough to keep up with the Fullerton, California, has adopted a escalating mortgage payments. stance of waiting and continuing to rent In May 2006, the mortgage rate reset while keeping his eyes on the housing higher. In addition, the three-bedroom market. brick home with wood siding and a "As a renter, it doesn't make sense to buy garage needed major repairs. He and his wife installed new carpet and tile and right now," says Merrett, who handles painted all of the interior. They repaired land acquisitions for an apartment the garage door. And when the plumbing developer. "I can easily survive on my backed up, Brannon spent hours digging low rent. And I've been closely watching up the rock garden, creating a 6-foot the shifts of the real estate market. I'll hole, and managed to do the repairs continue to wait for the prices to come himself. down enough so that even if the market continues to soften, it will not put me in His wife, a waitress, lost her job. The air financial trouble" after a home sale. conditioning went out, and in a city with sometimes 115-degree heat in the 2) Renters are finding it harder to summer, they had to buy new units with buy. credit cards. Soon, they were $10,000 in debt, and their monthly mortgage bills Many renters can't qualify for an had ballooned to nearly $1,900 from affordable mortgage because of stricter $1,040. They fell two months behind on lending rules that call for larger down the mortgage. payments and excellent credit. The days of getting a home with no money down Facing foreclosure, they had no choice or with other unconventional loan but to sell the house last year for structures are gone. $128,000. And, saddled with new debt, a
bankruptcy filing and no savings, they moved into a two-bedroom apartment. Their rent is $1,093 a month -- almost exactly the original amount of their mortgage payments. Affected Children â&#x20AC;&#x153;Makes You Sadâ&#x20AC;? "We were scared about what apartment we could get with that credit history," says Brannon Cox, who has a 4-year-old daughter and a second child due in May. "Our daughter says she wants to go back to the old house, and that makes you sad. We still go back to birthday parties with her old friends." Scores of foreclosed homeowners, now stuck with tarnished credit, are finding it harder to get loans as lenders tighten their rules and standards. As more of them become renters, overall demand for rental property rises. "There's been a big shift, and it's a national trend," says Jeremy Brandt, CEO of 1-800-CashOffer, which connects home sellers with real estate investors. "We're seeing more and more people moving into renting because of foreclosures, and rents are increasing."
That's especially true in metro areas with stable job markets. Signs of the demand abound, and in some areas, the need for rental units is sparking construction of rental apartment buildings -- a trend that, over time, could help ease rental prices as the supply of apartments rises. In Dallas, apartment construction is underway, including plans for a 15-story building. A 300-unit apartment complex is planned in San Antonio.
ACCESSLASVEGAS June | July 2008
In the meantime, rents continue to rise. In the Seattle area, rents rose 2.1% in the first quarter of 2008 over the previous quarter and nearly 9% since the first quarter of 2007. Vacancies in some neighborhoods are at 3%. The average annual rent increase for all units was $84 a month, says Tom Cain of Seattle-based Apartment Insights Washington, an apartment-market-research firm. "The rental market is really healthy," Cain says. "Incentives are going away. Renters are not interested in getting into housing, and the number of foreclosures is going up a bit." The withering housing market is also extracting an emotional toll, forcing renters out of their homes as landlords go into foreclosure. No hard data exist on how many homeowners who lose homes to foreclosure are becoming renters. But 18% of foreclosures started in the third quarter of 2007 involved non-owneroccupied homes, according to a study by the Mortgage Bankers Association -- a sign that tenants are hardly immune to the housing meltdown.
In December, she packed her belongings. Along with her Dalmatian, Target, and black Lab, Samson, she moved into a new home to rent. But Dayton says she hasn't received her rental deposit back. "I was confused and dumbfounded," she says. "I'd paid my rent month to month. I learned to always be prepared for the unexpected. And this time, I checked out the new place first to be sure it wasn't in default."
The Flip Side Of Renting: Home Prices Help Potential Buyers More Affordable Homes Means Apartment Renters Could Turn To Buyers Source: In Business Las Vegas
10 Days To Move Out
SPECIAL REPORT (PART 2) BENEFITS: Renters CRIPPLES: Multi-Family Owners
Tammy Dayton, 46, of Lewisville, Texas, who works in outside sales, had rented a 2,700-square-foot home for about two years.
The drop in housing prices is helping set the stage for the Las Vegas market's recovery, even though the timetable can't be pinpointed.
One day, a sheriff's deputy came to the door, telling her she'd need to leave because the mortgage wasn't being paid.
The 1,794 single-family homes sold in April were 21 percent higher than March and 30 percent higher than April 2007, according to the Greater Las Vegas Association of Realtors. That's good news for a housing market that has had nothing but bad news for most of the past 18 months. The fall in median sales prices, which in April were down 23 percent, has helped make homes more affordable and put more people in the range to buy them. But that drop in prices is hurting homeowners who want to draw on equity.
Once the deputy realized she was a renter and not the owner, she was given 10 days to move out. "I was totally in a bind," Dayton says. "I didn't know what was going on, and I needed to find another arrangement."
Countrywide has suspended the home equity credit lines of most of its Las Vegas customers. Bloomberg News reports that since January lenders are targeting cities where values are falling. That includes Los Angeles and Chicago. Along with Countywide, Bank of America and Washington Mutual have frozen 600,000 equity credit lines nationwide, Bloomberg reported.
The rapid appreciation of home prices in 2004 and 2005 prompted many homeowners to borrow against that newfound wealth. That helped stimulate the local economy, but the cutoff to equity lines may be showing up in retail spending, which, according to the latest statistics in February, was down more than 3 percent from February 2007. Brad Henderson, president of Evofi One, a mortgage broker and banker, estimates that as many as 15,000 people have had their credit lines suspended. It doesn't matter what their credit score or income are, says Henderson, who adds it is based on loan-to-value. "It is one more thing taking money out of the economy," Henderson says. Although many have been cut off, some homeowners already reached their limit in drawing home equity to make purchases and some have used it to help pay for business or cover real estate investments.
Numbers: A Closer Look Into The Housing Crisis Las Vegas Home Values Crumble; #1 In Nation For Falling Prices Source: In Business Las Vegas
SPECIAL REPORT (PART 3) BENEFITS: No One CRIPPLES: Everyone In the most recent Standard & Poor's / Case Schiller Home Price indexes, the leading measure of U.S. home prices, Las Vegas ranked No. 1 in the nation surpassing Miami when it comes to falling home prices. The 22.8 percent decline in Las Vegas year-over-year is followed by Miami at 21.7 percent and Phoenix at 20.8 percent. In its latest analysis, Metrostudy, a housing analyst firm, said the industry is continuing to rid itself of excess inventory and that gives way for some "moderate optimism" for 2009, but markets such as Las Vegas could take longer to recover. Markets that had an artificial shortage over the past five years and had
speculation and sub-prime financing will take much longer bottoming out and greater difficulty in seeing an upturn in the next two years. Any return to normalcy will depend on the mortgage market, Metrostudy's Mike Inselmann said. New credit and underwriting guidelines have disqualified many buyers and others who remain on the sidelines waiting for prices to fall further. As for Las Vegas, Metrostudy said the inventory of existing homes at the end of the first quarter is 28,136, a 17.5-month supply. That's 3.1 percent higher than March 2007. It's too soon to determine if the boost of existing home sales in March compared to February is a sustainable trend, says Josh Seime, manager of the Las Vegas Metrostudy division. As for existing-homes prices, the firm put the median price at $260,000, a 24 percent decline over March 2007. The existing-home market remains competitive, and inventory could reach new highs by the third quarter if foreclosure and credit market trends persist, he says.
quarter, compared with 40 percent in 2007's fourth quarter, Seime says. Metrostudy remains bullish in Las Vegas over the long term given its population growth, officials said.
Major Credit Crunch Changes Apartment Buyers' Preferences Source: Anuradha Kher, Online News
SPECIAL REPORT (PART 4) BENEFITS: No One CRIPPLES: Multi-Family Owners Demand for apartment homes remains strong, but the continued credit crunch is causing the volume of property sales to slow sharply and making it more difficult for apartment firms to access the debt and equity markets, according to the National Multi Housing Council’s (NMHC) Quarterly Survey of apartment market conditions.
Fifty-nine percent of the detached housing starts are below $325,000, compared with 45 percent in 2007's first quarter. Homes under construction, finished, vacant and models dropped 41 percent to 6,673 units at the end of the first quarter, a 5.4-month supply, Seime says. Under construction inventory fell 60 percent for the year ending in March to 2,371 units, while the inventory of finished vacant homes fell 25.5 percent to 2,956 homes. Finished vacant homes made up 44 percent of the inventory in the first
In fact, Obrinsky says that professionally managed properties may become even more desirable in the current market as renters of many of these individually owned condos and houses find themselves without housing because the owners of these properties have lost the property to foreclosure. “In our experience, apartments are holding up better than any other property type,” Keith Misner, executive managing director of Cushman & Wakefield's Capital Markets Group, tells MHN. “This is mainly because supply and demand in the apartment sector are balanced, and even though there is a credit crunch, Fannie and Freddie are doing a good job of introducing new products into the market.” On the property sales front, the housing market downturn and financial market dislocation are affecting multi-family financing, and thus, the volume of transactions. The Debt Financing Index posted a sharp fall, to 22 from 45 in January. Two-thirds of respondents noted that borrowing conditions had worsened compared with three months earlier, a reflection of the continued widening of spreads and tightening of credit standards.
"The existing-home market will be the key driver of the overall Las Vegas housing market in 2008," Seime says. In the new-home market, Seime says 1,461 single-family homes were started during the first quarter and 2,780 closings, both lower than 2007's first quarter. Although both are declining, Seime says its good news that closings exceed starts because inventory will continue to decline.
respondents reported a decrease in the number of renters leaving to become homeowners.”
The Market Tightness Index, which measures changes in occupancy rates and/or rents, improved significantly from 33 in January to 44, as more respondents reported tighter apartment conditions -- and fewer reported looser conditions -- than three months earlier. Note: A reading above 50 indicates that, on balance, conditions are improving; a reading below 50 indicates that conditions are worsening; and a reading of 50 indicates that conditions are unchanged.
The “shadow market” of rental homes being offered by individuals no longer able to afford to live in them is not seriously eroding demand for professionally managed apartments, suggests NMHC. “The bursting of the for-sale housing bubble has greatly slowed the outflow of renters into ownership,” says Mark Obrinsky, NMHC chief economist. “More than 80 percent of the survey
Equity financing is also increasingly difficult to obtain. The Equity Financing Index declined to 13, its lowest reading ever. A record 76 percent of respondents reported that equity finance was less available, compared with 17 percent who indicated conditions were unchanged, and two percent who saw improvements. “The average deal size is reducing. Larger deals are more difficult to arrange because people are for smaller deals and spreading their risk,” says Misner. A $50 million deal is more likely than a $100 million deal. The Sales Volume Index declined to 13 this quarter, the second lowest reading in the NMHC Survey’s history. “While there are still many buyers looking to purchase apartment properties, there is an unusually wide disparity between buyers and sellers about the appropriate prices in today’s market,” says Obrinsky.
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In Apartment Sector, Better To Buy Than Build Source: Commercial Property News
If you’re an apartment property buyer and can obtain financing, now is a good time to find opportunities. But developers would do well to lay low. That was the message from Greg Willett, vice president of research & analysis for M/ PF Yieldstar, speaking today during the session “The Flight to Multi-Family: Today’s Apartment Market” at the National Association of Real Estate Editors’ 42nd annual real estate journalism conference. Generally speaking, few U.S. cities have been overbuilt, he noted, listing only Houston, Phoenix and Austin as markets with significant overdevelopment and Atlanta and Seattle as markets to watch. But the credit crunch hasn’t yet hit the apartment sector, he cautioned, and there are large numbers of projects that had been planned as condominiums that are instead coming online as for-rent properties. About one third of the apartments delivered last year in Washington, D.C., and Boston were started as condos, for instance, and about 20 percent of properties under construction now were begun as condos. The shadow market from for-sale housing and the impact of struggling for-sale properties on job production are also negatives. Demand trends are difficult to predict, with the loss of renters to buying well below the historical norm and not likely to change, Willett said, and foreclosures are not likely to have much impact on the rental apartment market because of the tendency to move into single-family rental homes or smaller, independently owned apartment properties. “It’s about customer choice at this point,” he added.
Manhattanizing Las Vegas: How To Profit From The Second Phase Of Vertical Growth Source: Paul Murad
Author and Las Vegas entrepreneur Paul Murad is set to release his new book: Manhattanizing Las Vegas: How to Profit from the Second Phase of Vertical Growth. Murad released the first edition of "Manhattanizing Las Vegas" to rave reviews in 2005. This second look at the industry in a slowing economy will soon be a must read for investors. Manhattanizing Las Vegas invites us into the world of glitz and glamour, multi-billion dollar projects, and the future of the jewel of the desert. Paul guides readers through market trends and current developments and provides advice to buyers looking to capitalize in a recession. A detailed analysis of three epicenters of growth in Las Vegas (the Strip, the South Strip, and Downtown) help readers to determine the best prospects for investment. Paul's book also delves into different investment strategies to help readers choose the best approach for their individual short and long-term goals.
The best fundamentals will likely be found on the West Coast in 2008-2009, Willett said. The 10 top performing markets in order will be San Francisco, Salt Lake City, Oakland, Nashville, Portland, Seattle, San Jose, Philadelphia, Richmond and Austin, he predicted. The worst performers among the 57 cities tracked by M/PF Yieldstar -- thanks in large part to condo fallout--include Phoenix, Jacksonville, Memphis, Tampa, Greensboro, Dayton, Las Vegas, Detroit, West Palm Beach and Atlanta (with Atlanta remaining difficult to predict). Investment transaction volume is down and will likely remain so for the next 12 to 18 months, predicted Mark Alfieri, COO of Behringer Harvard’s Multifamily REIT I. And there are certainly downsides to buying, he noted, including increasing cap rates, lower construction costs and land values (benefiting developers), the difficult financing market and overall economic performance. But his company is pursuing deals, albeit with lower return expectations and in partnership with a Dutch pension fund. Its preferred markets have strong job growth, balanced supply and demand, favorable rent growth and a strong transportation element. Gables Residential is also active, according to Sue Ansel, COO, although the private REIT’s focus is now on mixed-use properties.
Las Vegas Investment Tidbit • NOT A GOOD BUY, OR IS IT? - A souring economy and a housing market downturn helped lower vacant valley land values in the first quarter of 2008, reports Applied Analysis. Median vacant land values were $598,700 per acre at the end of March, marking a 24.6 percent drop from a year ago.
Las Vegas Metro Occupancy April 2007 through March 2008 94% 93% 92%
Source: CB Richard Ellis (97,162 Apartment Units Surveyed in March 2008)
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ACCESSLASVEGAS June | July 2008
Las Vegas Snap Shot KEY INDICATORS
1Q 2008 RESULTS
Source: Red Capital Group
YEAR OVER YEAR CHANGE REMAINDER OF 2008 OUTLOOK
Access Investment Offerings COMMUNITY (UNITS) The Reserve at Arrow Canyon (426)
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PER UNIT PRICE BROKER / CONTACT INFORMATION $ 179,930 The Bentley Group / 702.855.0440
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The Bentley Group / 702.855.0440
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Access Recent Transactions COMMUNITY (UNITS) Villa Serena (288 - Conversion)
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April 3, 2008
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March 27, 2008
Fairfield Residential Broder & Sachse
The Retreat (120)
March 20, 2008
Siegel Suites Twain II (228)
March 13, 2008
The Siegel Group
Copper Hills (272)
February 29, 2008
Artisan Real Estate
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February 28, 2008
Rancho Destino (184)
February 6, 2008
Colony Realty Partners
For additional information and / or broker information on Access Investment Offerings and / or Access Recent Transactions contact Bret Holmes at 702.401.4674.
Apartment Rental Market Largely Unchanged in Wake of Housing Crises, Study Confirms Source: Anuradha Kher, Online News
Rents are growing modestly, occupancy is unchanged and the rental apartment segment appears to be immune to the problems occurring in other housing sectors, according to a recent study released by RealFacts, a multi-family data specialist. The RealFacts database included more than 3.16 million rental units in 15 states (mostly in the Western part of the United States, but also including others like Florida and Texas). The company chose the 15 states based on where the company has clients so far. But Caroline S. Latham, CEO of RealFacts, states that this study also helps in understanding the situation across the U.S. “Except for New York, which is a completely different animal, this study is representative of what is going on in the country. Many of the regions we surveyed are large MSAs are similar to the ones not included in the survey,” she says.
housing, and have thus left the market-rate housing market,” she says. A closer look at the survey indicates that while demand for rental apartments has slightly decreased over the past year, the supply of rental housing has also slightly decreased.
Despite Short-Term Setbacks, Las Vegas Multi-Family Conditions Expected To Improve Source: Marcus & Millichap News Release
After several years of recording some of the country’s most robust economic growth, Las Vegas is forecast to experience softening in the rest of 2008 due to the ongoing housing slump, according to a first-quarter Apartment Research Report by Marcus & Millichap, the nation’s largest real estate investment services firm. Despite the drop in overall employment, steady gains are forecast in the educational and health services and leisure and hospitality sectors, which bodes well for current apartment owners, as employees for both industries are typically unable to afford homeownership.
The highest quarterly rent growth was seen in Oklahoma City, Okla. (2.2 percent), Seattle-Tacoma-Bellevue area (2.1 percent), Salt Lake City (2 percent) and the San Francisco-OaklandFremont area (1.2 percent). The survey conducted in March indicates that the average rent for all locations was $993. That means the average apartment resident pays almost $12,000 a year for housing. RealFacts found that occupancy rates stabilized in the first quarter of 2008. In marked contrast to the last three months of 2007, when occupancy fell a full percentage point for the entire database, there was no change in early 2008. While roughly half the Metropolitan Statistical Areas (MSAs) showed a continued decline in occupancy, the other half showed an occupancy increase. The current average occupancy rate for all units is 92.6 percent, well below the ideal 95 percent. “This factor favors renters over landlords, and thus exerts a check on rent growth, which favors landlords over renters, which maintains a good balance in the market,” according to Latham. The study also shows that the foreclosures in the single-family market are not causing an increased demand in rental housing. In fact, in the MSAs that lead the nation in foreclosures, there has also been a decrease in demand for apartments. Latham speculates that people are renting houses rather than apartments, and are thus part of a shadow market that is not currently being measured. “Another possible explanation is that the loss of their house was part of a larger financial collapse for people, and that they have become eligible for affordable
“Out-of-state buyers, particularly from California, will continue to target apartment properties in Las Vegas, attracted by the metro’s long-term growth prospects,” says John Vorsheck, regional manager of the Las Vegas office of Marcus & Millichap. Following are some of the most significant aspects of the Las Vegas Apartment Research Report: • Builders are projected to complete approximately 2,300 apartment units in 2008. • Vacancy is forecast to end the year at 7.7 percent. • The average asking rent is forecast to increase 0.9 percent to $862 per month. • Effective rents will end the year at $811 per month. • Development of the 77-acre, mixed-use City Center will provide a boost to the metro’s construction sector, builders are expected to hire another 1,400 workers for the project.
ACCESSLASVEGAS June | July 2008
The Winning Hand Is Still In Las Vegas
unemployment rate up to 5.1 percent at the end of 2007, an increase of 1 percent over the previous year, according to the Bureau of Labor Statistics.
Las Vegas’ Coming Hotel Boom Will Benefit Its Apartment Market
The negligible job growth caused apartment demand to soften, said Brian Gordon, principal of Applied Analysis, a Las Vegas-based economic consulting firm. Even worse, the apartment market is competing with the single family homes and condos that investors gobbled up during the housing boom. “These investors haven’t been able to sell these homes and condos, so now they’re renting them out,” he explained.
Source: Jennifer Popovec, Apartment Finance Today
Multi-family owners and developers have been dealt a bad hand for 2008 here, but they remain confident they’ll win big in 2009 and 2010 as 43,000 hotel rooms open on the Strip and more than 200,000 jobs are created. “We’re experiencing a little bit of heartburn right now because of job losses and the housing slowdown,” said Greg Spezzano, director of design and marketing for Alliance Residential, a Phoenix-based developer, owner, and manager of apartments. “But, if the numbers bear out, we’ll actually have a housing deficit.” Alliance Residential, which owns or manages 3,500 apartment units in the Las Vegas area, has positioned itself to take advantage of the housing demand, Spezzano said. The company has a 312 unit complex called Broadstone Azur in lease-up and another 186-unit project, dubbed Broadstone Indigo, in pre-leasing. It also has plans to break ground on two more communities totaling 720 units by early April. All four of the company’s new projects are located in North Las Vegas, the hot new area for multifamily development. “We’re really excited about the coming years because we’ll be able to reap the rewards of what we’re doing now,” Spezzano said. Demand Will Outpace Supply Over the past few years, Las Vegas’ multi-family market has gotten a boost from strong job growth -- not only from tourism, but also from the construction industry. But the slowdown in single family home construction, coupled with the mortgage meltdown, has put a damper on job growth in the Las Vegas Valley. In 2007, the Las Vegas metro area added only 7,000 jobs compared to 33,800 jobs in 2006, which pushed the
The Las Vegas apartment market had a surplus of about 4,000 rental units in 2007, and at the end of the year, it was 92.3 percent occupied, down from 95.4 percent at the end of 2006, according to Applied Analysis.
LOCALEFFECTS Concessions are also prevalent across the Las Vegas metro area, especially for new properties, “We are absorbing about 30 units per month, and to do that we are offering concessions including one month free rent on a 12-month lease to two months free rent on longer leases,” said Alliance Residential’s Spezzano. Fortunately, single family home builders and condo developers have pulled back dramatically. While there are about 12,238 condos under construction, developers have pulled the plug on nearly 22,000 condo units, Gordon noted. And even though 2,100 units will come online this year, along with another 3,388 units in 2009, demand is still expected to outpace supply.
with the opening of 10,000 rooms, so we have an unprecedented amount of openings that are coming.” Roughly 6,000 hotel rooms will be added to Las Vegas’ existing 130,000 room inventory this year, with another 23,000 opening in 2009 and 13,200 opening in 2010, according to the Las Vegas Convention and Visitors Authority. “We have $35 billion of development in the resort community, and those resorts and casinos will require significant employment,” Gordon said. “Ultimately that employment will drive demand for rental housing.” Over the next four years, Las Vegas will expand by 562,000 people, pushing the city’s population to more than 2.5 million. During that time frame, the area is expected to average job growth of 4.8 percent annually. Prices Hold Steady With such a bright future, prices and cap rates for Las Vegas apartment assets have moved very little. Class A properties are still selling at $125,000 to $165,000 per door, according to David Baird, a multi-family broker with Sperry Van Ness. Meanwhile, Class B assets are trading at $75,000 to $85,000 per door, and Class C properties are raising $60,000 to $70,000 per door. He said cap rates have stayed steady at somewhere between 5 percent and the mid-6 percent range. However, investment activity is down substantially due to the diminished liquidity in the capital markets. Baird estimates that transaction volume is down about 75 percent compared to this time last year.
At the end of this year, occupancy is expected to increase more than 1 percent to reach 93.5 percent. And, by the end of 2009, the market will be 95 percent occupied as the rental undersupply is expected to grow to 8,700 units before climbing to 13,700 units in 2010 and a whopping 15,200 units in 2011.
In 2007, Real Capital Analytics tracked $1.1 billion worth of apartment transactions, down 22 percent from 2006. The average unit price was $106,302, up 7 percent from 2006, and the average cap rate was 5.7 percent. Private investors accounted for almost 60 percent of the buyers in Las Vegas, while condo converters represented 16 percent of the buyers.
“There is going to be an unbelievable (hotel) boom between now and 2010,” Spezzano points out. “In the past, the apartment market’s peak rental rate growth and occupancy corresponded
“This is the calm before the storm,” Baird said. “Activity is slow right now, so investors should take advantage of opportunities to buy before the next boom happens.”
Customer Service 101: Reach Out & Keep Your Residents Phase 5 of a 5 Phase Series for Leasing Consultants and Managers
Phase Five: A Personal Visit Make an appointment and go for renewal and increased rent. Be creative. Check the resident’s file before the appointment, take a gift with you and send flowers after the appointment. This is the actual renewal, so be prepared and go on time. Have your paperwork neat and in order. If the resident is coming to your office, serve refreshments. If you are going to his / her apartment, take a gift. Some managers send flowers or plants to the resident’s work place after they sign a renewal lease.
For Rent Uses Social Media To Boost Online Traffic, Creates Video Contest
It’s impressive and a great way to get referrals. This 5-phase program is designed to help you get to know new residents and stay in
For Rent Media Solutions, a division of Dominion Enterprises, has opened its “If Only Your Apartment Furniture Could Talk” video contest, in which participants are asked to creatively express through the eyes and voice of their current apartment furniture why they should win $10,000 towards new furniture. Videos must be original and two minutes in length or shorter. “Social media is a proven promotional tool which enables us to build our brand effectively,” says Brock MacLean, vice president of national sales and development for For Rent Media Solutions. “With this contest, we are reaching out to our consumers and giving them the opportunity to create their own Web 2.0 user generated content. This helps strengthen our consumer relationships, build brand
loyalty and solidify our position as an innovative leader in the industry.” The furniture promotion is supported by online and offline advertising including billboard advertising in select markets, national print advertising targeting college students and a public relations campaign that incorporates social media placement.
touch with long time residents. Practice this consistently and the renewal leases will be no problem! It’s your property, it’s your bottom line. According to For Rent Media Solutions, participating property managers will see an increase in leads from the boost in site traffic on ForRent.com. “The contest also provides an opportunity for property managers to interact more with their residents -- increasing the residents’ brand loyalty in the community and the property management company -- and can be used as an extension to their existing Resident Retention Program,” says MacLean. After the contest closes on June 15, visitors to WinApartmentFurniture.com will vote for their favorite video. Voters have the opportunity to comment on each video and e-mail videos to friends to encourage them to vote. Consumers can also use a syndication widget to easily distribute their favorite video to more than 20 popular social networking Web sites, including MySpace, Facebook and Friendster. The winning video and the top 10 finalists will be announced on or around July 22, 2008. The future is social media, see your property in focus with For Rent Media Solutions.
ACCESSLASVEGAS June | July 2008
Advanced Management Group Introduces “Advanced NOI Results”; Moves Office Advanced Management Group Nevada, LLC, a real estate management company providing advanced property management, financial and accounting, and asset management services for multi-family properties, launches “Advanced NOI Results: A Better Design for Your Bottom Line”. Advanced Management Group designs strategies focused on owners profitability through efficiency. By creating obtainable benchmarks, goals are set and managers are held accountable for maximizing their resources to achieve the maximum results. Even the most finite areas to improve an owners bottom line are identified and all actions are monitored to ensure success. At the beginning of June, Advanced Management Group will move their offices to the following address, 2775 South Rainbow Boulevard, #101C, Las Vegas, Nevada 89117. Our new location is bigger, better and centrally located to help better serve you and your property(s). Come visit us to find out more about on how to get your property focused on “A Better Design for Your Bottom Line”. E-mail Advanced Management Group at firstname.lastname@example.org or contact Bret Holmes at 702.699.9261. For information, article consideration and featured columns Access Las Vegas can be contacted at 702.699,9261. The editor of this newsletter is Michael Fazio.
ACCESSLASVEGAS 8550 West Charleston Boulevard, Suite #102 Las Vegas, Nevada 89117