Marcus & Millichap released their annual National Apartment Report for 2013. Nationally, the report says powerful economic and demographic trends continue to drive the sector into its fourth year of expansion. The U.S. vacancy rates should reach 4.3% resulting in 4 to 5 % effective rent growth. New construction of about 150,000 units will temporarily create a supply and demand imbalance in many markets such as Austin, Charlotte and Houston. Over the next 2 years, the oldest echo boomers who just turned 28 will create a significant number of households. Additional households will form with the arrival of 1.2 million and 1.6 million immigrants annually through 2017.
Trulia released a report showing that the nearly 4,000,000 single family homes that were added to the market since 2005 have caused single-family home rents to flatten nationwide.
|Rent and Price Changes on Single Family Homes|
|#||U.S. Metro||Y-o-Y% change
|Y-o-Y % change
|1||Las Vegas, NV||-1.9%||24.6%|
|2||Fort Lauderdale, FL||-1.2%||10.7%|
|4||Orange County, CA||-0.7%||13.7%|
|6||Los Angeles, CA||-0.4%||11.0%|
|7||San Diego, CA||-0.1%||13.4%|
|8||New York, NY-NJ||0.2%||4.1%|
|11||San Antonio, TX||2.1%||5.5%|
|15||West Palm Beach, FL||3.8%||14.1%|
|16||Riverside–San Bernardino, CA||3.8%||15.6%|
|18||Tampa–St. Petersburg, FL||4.1%||7.2%|
Apartment occupancy remained right around the essentially full mark of 95% in the nation’s core 100 metro areas, according to preliminary 1st quarter 2013 data from MPF Research. But rent growth levels continued to ease as apartment construction continued to ramp up.
The top 5 markets for year over year rent growth were San Francisco at 6.3%, Oakland at 6.3%, San Jose at 5.6%, Denver/ Boulder at 5.4% and Austin at 4.9%.
Supply has surpassed demand and we may begin to see a slow down in rent growth levels for Q2 2013 with the increase in new construction. 270,000 units are currently under construction in the United States which is now inline with pre-recession levels.
Blackstone, the private equity firm and the largest private real estate owner in the US, had spent a total of $3.5 Billion on 20,000 single family rental homes within the last year. In October, the company was spending more than $100 million a week on houses.
Blackstone is by far the largest owner of single family rental homes and has focused their buying in nine markets including Atlanta, Chicago, Las Vegas, Phoenix, Northern and Southern California; Miami, Orlando and Tampa, Florida.
“Investors are buying homes, in part, to rent them out, and that has added a lot of rental supply, and that’s preventing rents from rising,” Jed Kolko, San Francisco-based Trulia’s chief economist, said in a telephone interview. “It means some investors will start to think about selling those single-family rentals.”
Blackstone will rent and manage the homes through a subsidiary of Riverstone Residential call Invitation Homes.
Realty Mogul, the online marketplace for real estate investments, makes it incredibly easy for accredited investors, (individuals making more than $200K per year or has a net worth of more than $1 million), the ability to invest as little as $5,000 in real estate projects.
The service offers insider access to pre-vetted real estate investment opportunities including apartments, office buildings and retail centers. CEO Jilliene Helman says “we’re redefining the way people invest in real estate, and allowing them access that was historically unavailable to them.”
With the new JOBS Act, non accredited investors will be able to participate in real estate investment opportunities. That should go into effect within the next few months. This is known as crowdsourcing and Realty Mogul is in a perfect position to take advantage of this new law.
- Realty Mogul, Crowdfunding for Real Estate, Picked as Finalist to Demo at HATCH (prnewswire.com)
- Crowd Funding for Aspiring Real Estate Moguls (forbes.com)
WeareApartments.org has a nice tool showing the economic impact the apartment industry has on the local and national market. Last year, the apartment industry contributed $1.1 Trillion to the US economy. The combined contribution of apartment construction, operations and resident spending equals $1.1 trillion, or more than $3 billion every day. Additional national apartment data from the report:
- Over 35 Million apartment residents
- Spending power of $421 Billion
- Over 19 Million apartment units
- Operation dollars spent – $68 Billion
- On-site apartment jobs – 686,054
- $15 Billion spent on building new apartments producing 121,100 jobs
The US housing market tumbled in 2007. As a result, many home buyers who lost their homes to foreclosure have moved over to renting. In 2005, 69.1% of the US population owned a home, by 2011 this figure dropped to 66.4%–the lowest since 1999. A recent Morgan Stanley report refers to this transition as the rentership society.
According to the report, there are approximately 20 million rental properties in the US comprised of 4 units or less, representing approximately 50% of total rental housing units. This is categorized as the Single Family Home Market (SFH). Historically, about 5-6 million SFHs exchange hands in a year, representing $750-900 billion in asset value. All SFHs together have a value of roughly $3 trillion and this does not include the projected 7.5 million properties to be liquidated in the next 5 years.
There are approximately 17.5 million properties in the U.S. comprised of 5 units or more. Of this supply, only about 90% are 1 or 2 bedrooms. National REITs own 90% of their assets in the top 25 markets and this represents ~ 4% of total apartment inventory.
Source: NMHC Tabulations of 2011 Current Population Survey, Annual Social and Economic Supplement, US Census Bureau (www.census.gov/cps). “Other” housing includes units in hotels, rooming houses, dormitories, tents or unspecified housing. Updated September 2011.
In 2011, the total housing units ended at around 132 Million. Of which, approximately 42 million are rentals.
According to most recent Q4 2011 census data, national vacancy rates were 9.4%. This equated to approximately .4% lower rates than Q3 2011. Vacancy rates, although relatively low, are still some of the highest in the last 10 years.