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Eviction Ban Expires: What It Means For Renters and Owners

After numerous extensions over the last 12 months, the federal eviction ban expired this past weekend. With millions of Americans facing eviction and landlords looking to catch up on delinquency a wide variety of questions surrounding the expiring ban have been asked.

In a recent article from Multi-Housing News, author Jeffery Steele outlines how the expiring eviction ban will affect delinquent tenants and landlords moving forward. Some major takeaways include statements from both sides of the eviction ban debate. Gary M. Tenzer, principal & co-founder of real estate capital advisor George Smith Partners, told Multi-Housing News:

“While the moratorium has been beneficial to many (residents) who have been unable to work and pay rent during the COVID pandemic, it has imposed an undue hardship on landlords who must continue to pay the operating expenses and mortgage payments throughout the moratorium”

Tenzer continued his sentiment by point out another extension to the eviction moratorium would have resulted in an increased amount of loan defaults and “inevitable” foreclosures.

Another interesting point in the article was from a study conducted by a non-profit organization called The Aspen Institute. According to their study, 6.5 million American households are behind on their rent obligations. The average debt is in excess of $3,000. Across the U.S. renters owe approximately $20 billion to their landlords. More than 15 million people live in households with overdue rental payments.

Click here for the Multi-Housing News if you want to read it in its entirety.


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Rent Control Battle in California and Beyond

“Certainly there is a housing shortage, so we need to be building housing, but what we are also seeking to address is the crisis of displacement…We’re seeing vulnerable communities — people of color, elderly folks, people with disabilities, single parents, low-income people and the middle class — being pushed out of California and becoming homeless.”

One of the hottest items on California’s November voting ballot is a rent control initiative called Proposition 10. The proposal intends to repeal a 23-year-old state law that tightly limits all forms of rent control within California. The desire for rent control in California has coincided with the rising cost of living throughout the state.

According to The Sacramento Bee, the nonpartisan Legislative Analyst’s Office (LAO) reports “Soaring housing costs have led to a net loss of 1 million citizens who have fled California from 2007 to 2016…and homelessness is higher here than any other place in the nation.”

Despite the widespread support from community groups like the AIDS Healthcare Foundation, California Teachers Association, California Nurses Association, and many others, the latest poll by the Public Policy Institute of California reports,

“A whopping 60 percent of likely voters say they will vote against Proposition 10, a measure on the Nov. 6 statewide ballot that would repeal the state Costa-Hawkins Rental Housing Act, which strictly limits rent control in cities across California. Repeal would restore broad authority to cities to enact any rent control law they choose.”

According to the LAO’s analysis of Proposition 10, the proposed repeals could result in more harm than good. LAO analysts warned of declined new rental construction, removal of units from the market, and the value of housing possibly dropping. Any of these factors would directly affect local government property tax revenue, which equates to ~$60 billion every year.  Furthermore, enacting new rent control laws would require millions of dollars per year to enforce, and result in a decline in income tax revenue, especially from the newly-affected property owners and investors.

It is important to consider how these restrictive laws and proposals affect citizens, property owners and investors, and a state’s overall economy. And while Proposition 10 is exclusive to California, and rent control laws vary from state to state, the negatives effects outlined in the LAO analysis showcases how impactful the ongoing battle of rent control is from a real estate professional, owner, or investor standpoint.

Click here to learn more about Proposition 10 and rent control.

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Multifamily Holds Strong in First Half of 2018

At the halfway point of 2018, the U.S. multifamily market has held strong despite projected hurdles in the form of elevated supply levels, decelerated rent growth, and lack of affordability in major metros. As of June, the national average rent has risen to an all-time of $1,405 and year-over-year rents are up 2.9%, a 20-basis point jump from May.

With rents increasing by $29 in the second quarter, it is the highest quarterly rent growth percentage (2.1%) since the second quarter of 2015 when rents grew by 2.3%. The strong showing from the multifamily market should temper some fearful projections of decelerated rent growth turning into flattened or regressive rates after the peak years of 2015 and 2016.

The spring season is not a stranger to seeing elevated rent growth and is not necessarily a reliable indication of future trends but considering the doubts and reservations of the multifamily market’s strength entering 2018, the first-half numbers for the year are reassuring.

From a market standpoint, Orlando continues to lead the nation with 7.4% year-over-year rent growth. Markets in the Southwest such as Las Vegas (6.5%) and Phoenix (5.0%) have experienced rent growth as southern and western Californians look for more affordable living costs. Tech-based markets like Seattle, Denver, and  San Francisco rebounded with favorable rent growth in the second quarter of 2018 after experiencing some sharp deceleration in previous quarters. View the chart above to see how job growth, occupancy rate, rent growth, and supply levels are interacting with each other.

*All statistics are credited to Yardi Matrix

 

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Apartment List’s Renter Confidence Survey

Recently, Apartment List, a home-finding service that offers apartment recommendations based on personal experiences and preferences, released results from its third annual Renter Confidence Survey. According to Apartment List, the Renter Confidence Survey “is the largest survey focused exclusively on renters, providing unique insight into what states and cities must do to meet the needs of America’s 111 million renters.”

The survey is based on 45,000 survey responses gathered between October 1, 2016 and December 6, 2017, to determine the best/worst cities for apartment renters. Survey respondents gave their cities an overall score based 11 rating factors such as safety, affordability, job opportunities, weather, taxes, and more. Below is a graphical representation of overall renter satisfaction by state: 

Click here to interact with the graphic above

Here are some key overall findings from the Renter Confidence Survey:

  • Overall, the top four rated cities for renters are Plano, TX, Huntington Beach, CA, Scottsdale, AZ, and Cambridge, MA.
  • Among the 50 largest U.S. cities, Raleigh, NC, Boston, MA, Virginia Beach, VA and Minneapolis, MN earned the top scores for renter satisfaction. The lowest-rated cities were Detroit, MI, Oakland, CA and Tucson, AZ.
  • Small to mid-sized cities tended to receive higher ratings than large cities. 38 percent of small to mid-sized cities received A- or higher compared to large cities’ 24 percent.
  • States rated most-highly by their renters are Colorado, Alaska, South Dakota, Minnesota, and Idaho. States with the lowest ratings from their renters are Arkansas, Lousiana, Mississippi, Wyoming, and West Virgina.
  • Millennial renters love Boulder, CO, Madison, WI, and Arlington, VA.

In addition to overall ratings, renters rated specific factors that have a direct impact on their renting experience. Important takeaways include:

  • Markets with the most unsatisfied renters based on job opportunity are mostly southwest cities hit hard by recession such as Santa Ana, CA, San Bernardino, CA, Glendale, AZ, and Mesa, AZ.
  • Based on safety, renters rate Plano, TX, Boulder, CO, and Irvine, CA the highest.  Renters feel the least safe in Stockton, CA, San Bernardino, CA, New Orleans, LA, Memphis, TN, and Newark, NJ.
  • It’s no surprise Colorado and California have the highest-rated weather. Cold weather cities in the Rust Belt and Northeast have the lowest-rated weather.
  • Renters gave high ratings to college towns such as Boulder, CO, Ann Arbor, MI, Raleigh, NC, and Madison, WI for their social life.

Other important findings:

  • Only 38 percent of renters are satisfied with the cost of living in their city.
  • The top three factors renters are most satisfied with include commute time, pet-friendliness, and recreational activities.
  • The four factors that are most indicative of overall renter satisfaction are safety, job opportunities, social life, and recreational activities.

2018 Multifamily Outlook

2017 was a strong year for the multifamily industry. The market performed well with favorable demographics and provided a healthy investment environment. Despite a very high number of new units added to the market, occupancy rates stayed high as rental demand continued growth throughout the year. In addition, rents and property values had a generally-upward trend across the country, less certain cities and submarkets that experienced some challenges.

Will multifamily momentum carry over to 2018? While there are some mixed opinions, a number of industry indicators and pundits are confident the multifamily sector will remain strong in the new year. 

According to Doug Ressler,  director of business intelligence for commercial real estate data firm Yardi Matrix, new construction competition carrying over from 2017 could finally put a dent in occupancy rates.  “Occupancy will begin to have a slight downward trend in 2018 as new supply is introduced,” says Ressler. In 2017, occupancy rates averaged 95.6 percent. Based on Yardi Matrix data projections, 2018 will maintain a similar average of 95.4 percent.

That said, Ressler also noted the possibility of developers slowing the pace of new builds as the year progresses, which would improve the outlook for 2019. With fewer developments coming to market, 2019 would forecast some strong occupancy rates that could encourage property managers to increase rents. “We see national rent growth continue its positive climb in 2018,” says Ressler. in 2017, rents averaged an increase of 2.4 percent. Yardi Matrix projects 2018 rents to grow by 2.9 percent.

Industry professionals could see a change in target markets as the industry shifts into the new year. For example, some submarkets experienced strong growth as we rounded out 2017. So if that growth remains consistent this year, suburban/satellite cities benefitting from “demand overflow” could become popular investment environments.

All quotes and figures have been digested from Yardi Matrix and NREI Daily.  

 

 

AXIOMetrics – Market Trends

Last week, AXIOMetrics, a market research company that provides strategic insight reports for real estate professionals, published research detailing November market trends for apartments.

According to the report, “A signal that the national apartment market may be on the road to strengthening in 2018 was sent by November’s performance figures, which showed that annual effective rent growth increased by 21 basis points (bps) to 2.3%. ” This figure stands out because it is only the third time in the past seven years rent growth increased from October to November.

New York, Seattle, and Dallas are metros we are used to seeing toward the top of performance lists, but it is their smaller, surrounding sister cities that have been demonstrating strong numbers. For example, when comparing New York and Long Island, the difference in annual effective rent growth is very apparent. Long Island has averaged 3.8% annual rent growth since 2015. Even though that is middle-of-the-road performance on a national level, it is 250 base points (bps) above New York’s  1.3%. A similar pattern is found when comparing Dallas to Fort Worth and Seattle to Tacoma. 

“To use an age-old axiom in the real estate industry, location certainly does matter. And while not every company’s strategy best aligns with locating in adjacent markets such as these, it should also not be discounted either, as there is potential there for success on a property-by-property or a portfolio-by-portfolio basis.”

AXIOMetrics’ market trends report is filled with useful statistics and visual aids that could affect property and investment strategies, so a personal analysis of the information is advised.

Click here for the full report: AXIOMetrics November 2017 Market Trends

 

An Expert’s Opinion

Yesterday we discussed some useful research tools commercial real estate professionals can take advantage of to gain insight on their targeted market. We highlighted Yardi Systems as one of the industry leaders in real estate investment and property management software by providing detailed analyses pertaining to market characteristics such as demographics, median incomes, and other important micro and macro indicators.

Today we will be listening to a recent interview provided by Multifamily 5, a podcast hosted by the Dallas-based multifamily broker, Mark Allen, aimed at interviewing real estate investors, brokers, and other industry pundits to learn some of their keys to success.

In this particular podcast, the leader of the Yardi Matrix team, Jeff Adler, discusses his top six markets that are poised for success in the near future, how the real estate industry interacts with Yardi Matrix software, the benefits of class B, value-add properties, future economic cycles, and much more.

Click here to hear Adler’s expert opinion on his top six markets and how to use Yardi software programs to gain a better understanding of your desired market.

Apartment Demand Continues to Rise

Last week, Multifamily Executive published an article pertaining to the continuously rising demand for apartments across the country. Substantiated data provided by RealPage and Axiometrics indicate 2017’s second quarter meets less than half the current level of apartment demand.

Chief economist for RealPage, Greg Willett, accredits high apartment demand to strong job growth, limited loss of renters to home ownership, and attractive new apartment communities.

Click here for the full Multifamily Executive article and additional detailed statistics from RealPage and Axiometrics regarding apartment demand, occupany rates, and rent growth for the second quarter of 2017.

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Preparing for Peak Leasing Season

Peak leasing season generally takes place during the second and third quarter of the calendar year. It’s also when a multifamily property should be performing at its highest level by bringing in revenue and attracting new tenants at a higher rate than slower months of the year. Being ill-prepared for peak season can almost guarantee a property playing catch-up for the rest of the year chasing lost revenue dollars, and as a result, negatively affecting overall returns on investment.

In a recent article from National Real Estate Investor, author Scott Wickman, regional vice president of Western National Property Management, highlighted some essential techniques to use before peak leasing season that can boost a property’s performance in terms of value, revenue, and tenant retention/attraction.

Click here to see the entire National Real Estate Investor article and learn how to take full advantage of peak leasing season

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Phoenix Heating Up?

Phoenix has been experiencing steady improvements as of late, and it seems as if the capital of Arizona could continue trending upward for years to come. Yardi Matrix recently published the Spring 2017 Phoenix Multifamily Market Analysis. According to the report, new supply is on pace with demand, resulting in high occupancy rates, employment is on the rise, and job growth is strong thanks to low cost of living.

Other interesting facts and statistics included in the report:

  • Phoenix rents rose a nation-leading 5.1% year-over-year through March.
  • Yardi projects Phoenix rents to continue growing at above-trend 6% in 2017.
  • Strong investor demand: Over $5 billion worth of multifamily properties have changed hands since the start of 2016.
  • Over 1.1 million square feet of office space added to Phoenix market in first quarter of 2017.
  • $7 billion investment by Intel in the Fab 42 plant, which could produce ~10,000 local jobs.

The Yardi Matrix report contains a number of graphs, charts, and other helpful information so review the complete report for a complete understanding of the Phoenix multifamily market as of Spring 2017.

Click here for the entire Yardi Matrix Spring 2017 Phoenix Multifamily Market Analysis