Apartment Wire - 02/11/2015 (Plain Text Version)
Two giant trends helped the apartment business in 2014: The homeownership rate continued to fall and large numbers of young people finally got their own apartments. The number of households formed in the U.S. has been low for years, as young people doubled up with roommates or lived with parents. In 2014, they finally set off on their own. The increase in total households -- 1.66 million -- was the largest since 2005, according to the U.S. Census.
At the same time, the number of people who owned the home they live in fell by another 300,000 households in 2014, spilling more people into rental housing. Renters made up the majority of the population in cities at the core of nine of the nation’s 11 largest metro areas in 2013, including several lower-density, relatively inexpensive place such as Houston and Dallas. That’s a sharp change from 2006, when renters were the majority in just five of those cities.
Add those two trends together, and the number of renter-occupied residences grew by 2 million in 2014. No wonder the apartment business had a great year.
The S&P 500 fell 3.0 percent in January. But while the stock market fell overall, real estate investment trusts (REITs) did much, much better with a positive, 5.6 percent return in January, according to the FTSE NAREIT All REITs Index. Also, earnings season has begun, with announcements from REITs including United Dominion and Equity Residential. [return to top]
The top seven cities for multifamily investors include a trio of strong secondary markets: Nashville, Tenn., Minneapolis, Minn., and Denver, according to John Chang, first vice president of research services with brokerage firm Marcus & Millichap. Four core markets also made the list: New York City, Los Angeles, San Diego and the San Francisco Bay Area -- never mind the building cranes and the already-sky-high prices for properties. “With virtually non-existent vacancies and steady rent appreciation, New York apartments are primed for appreciation in the coming year,” says Chang, who is also one of the authors of M&M’s recent 2015 National Apartment Report. [return to top]
Lenders that provide financing through Fannie Mae and Freddie Mac loans programs finished strong in 2014, according to recently-released year-end numbers. Fannie Mae provided $28.9 billion in financing to multifamily properties, up from $28.8 billion in 2013. Freddie Mac‘s multifamily loan purchase and bond guarantee volume grew to $28.3 billion in 2014, up from $25.9 billion. [return to top]
The strongest secondary markets for apartments have a lot of characteristics in common -- including fast urban population growth and a strong outlook for employment. “We have these 18-hour-city markets that have a concentration of Baby Boomers and Millennials and an attractive cost of living and an attractive cost of doing business,” says Mitchell Roschelle, the U.S. national practice leader for PwC’s real estate advisory practice. He’s also author of the 2014 PWC Real Estate Investor Survey. [return to top]
Contenders have till March 30 to nominate renovation projects to the fourth annual EBie Awards, which celebrate measurable performance improvements in existing buildings. “We are particularly interested in getting more residential submissions, including affordable housing,” according to contest organizers Urban Green Council, the New York Chapter of the U.S. Green Building Council. The national juried competition will announce its winners June 22. [return to top]
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The job market is likely to produce a lot of jobs that don’t pay very much between now and 2022 – and that could mean even more strong demand for rental housing.
“Most of the projected job openings over the next 10 years will be in low-wage and low-skill occupations that tend to have very low homeownership rates,” says Leonard Kiefer, deputy chief economist for Freddie Mac. The U.S. homeownership rate is now about 64 percent.
The top occupations for projected job openings all have homeownership rates under 56 percent, including retail salespersons (55.6 percent), food preparers (27.2 percent), cashiers (36.8 percent), and waiters and waitresses (26.8 percent).