Apartment Rent Growth Reaches 14-Year High
Effective rents for new leases in the 100 largest U.S. apartment markets increased 1.9 percent during the second quarter, according to MPF Research, an industry-leading market intelligence division of RealPage, Inc. Quarterly apartment rent growth reached a 14-year high, producing numbers that haven’t been seen since late 2000.
The annual effective rent growth pace, as of the second quarter, came in at 3.5 percent, trending upward from 3.2 percent in the first quarter of 2014 and 2.9 percent in the fourth quarter of 2013. Monthly rents across the nation now average $1,153.
“Apartment owners and operators continue to have strong pricing power right now,” said MPF Research vice president Greg Willett. “Sizable rent hikes are occurring, especially in middle-market to bottom-tier properties, reflecting the especially tight occupancy rates seen for those units. If there’s a surprise in recent results, it’s that significant rent growth is also being generated at the very top of the apartment product spectrum. Even in projects finished just a year or so ago, higher rents are being realized when leases turn over, despite the fact that there’s competition from additional brand new developments just entering the market.”
Apartment occupancy across the nation’s 100 largest markets registered at 95.6 percent as of the second quarter. Occupancy improved from 95.0 percent as of the first quarter, with most of that increase simply reflecting that there’s a normal seasonal bump when leasing activity accelerates during the warmer weather months. More telling is that the second quarter 2014 occupancy rate has moved slightly ahead of the second quarter 2013 figure of 95.3 percent.
Two storylines are contributing to those strong occupancy results, according to Willett. “While the existing inventory has been very full in most locations for several years, metros that were economic recovery laggards are now realizing strong apartment demand. Thus, the occupancy numbers are improving rapidly in spots like Atlanta, Jacksonville, Sacramento and Riverside. Even Las Vegas, which has one of the biggest holes in performance to fill anywhere across the country, is moving notably in the right direction.”
Strong leasing activity at new completions is also shaping the occupancy figures, Willett reports. “Units at brand new properties are being leased about as quickly as they can be delivered in most cases. Thus, new supply in lease-up isn’t dampening overall occupancy to the degree that is typical.”
Demand for apartments across the 100 biggest markets nationally came in at 129,162 units during the second quarter, more than doubling the completion volume of 55,561 units. For the 12-month period ending in June, demand was seen for 219,812 units, compared to the new supply tally of 203,912 units.
Ongoing apartment construction at the end of the second quarter stood at 383,186 units in the top 100 markets. Construction starts have been roughly equal to completions during recent quarters, thus ongoing construction figures have been holding between 350,000 and 400,000 units for a year and a half.
Delving a bit further into the impressive quarterly rent growth numbers, effective rents for new leases climbed 4.4 percent in San Jose and 3.0 percent to 3.7 percent across Denver-Boulder, San Francisco, Chicago and Oakland. A long list of metros saw pricing jump 2.1 percent to 2.8 percent for the quarter, with the group including Atlanta, Boston, Nashville, Charlotte, Fort Worth, Portland, Dallas, Houston, Providence and Los Angeles.
In metros across the Midwest and Northeast, the extreme winter weather sharply curtailed rent growth. But most of those metros, such as Chicago and Boston, saw big rent comebacks and notable price increases as the weather warmed.
Annual rent growth leaders continue to feature concentrations of markets across the Pacific Northwest, Texas and Florida. Effective rents for new leases have climbed 9.4 percent during the past year in Oakland, 8.9 percent in San Jose, 8.4 percent in Denver-Boulder, and 7.4 percent in Portland. Metros with effective rents for new leases up 5.0 percent to 5.6 percent yearly include Houston, Atlanta, Seattle-Tacoma, Sacramento, San Francisco and Miami. Rents have jumped 4.0 percent to 4.8 percent during the past year across Nashville, Fort Lauderdale, West Palm Beach, Austin and Fort Worth.
Look for the apartment market’s performance to cool a bit right at the end of 2014, according to MPF Research. “Reflecting normal seasonality, during the fourth quarter, there’s a tendency to give back part of the gains realized earlier,” Willett said. “We’ll be especially vulnerable to that pattern this year, given the large block of product scheduled for completion right at the end of the year. However, the performance seen during the first half of 2014 has been so strong that the market is now on track to realize revenue growth that’s well above the level that generally was anticipated coming into the year.”
MPF Research analysts highlight the nation’s latest apartment rent growth statistics, as well as other key performance indicators for rental housing in a discussion found at www.realpage.com/MPFQ2-2014-Report.*
Fixed Mortgage Rates Lower Than Same Time Last Year
Freddie Mac released the results of its Primary Mortgage Market Survey (PMMS), showing average fixed mortgage rates moving lower following the release of the first quarter real GDP final estimate. Fixed mortgage rates are lower this week than at the same time last year when Fed remarks spurred market speculation that it could begin tapering its bond purchases causing mortgage rates to spike.
30-year fixed-rate mortgage (FRM) averaged 4.14 percent with an average 0.5 point for the week ending June 26, 2014, down from last week when it averaged 4.17 percent. A year ago at this time, the 30-year FRM averaged 4.46 percent.
15-year FRM this week averaged 3.22 percent with an average 0.5 point, down from last week when it averaged 3.30 percent. A year ago at this time, the 15-year FRM averaged 3.50 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.98 percent this week with an average 0.3 point, down from last week when it averaged 3.00 percent. A year ago, the 5-year ARM averaged 3.08 percent.
1-year Treasury-indexed ARM averaged 2.40 percent this week with an average 0.4 point, down from last week when it averaged 2.41 percent. At this time last year, the 1-year ARM averaged 2.66 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for the Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.
Frank Nothaft, vice president and chief economist, Freddie Mac, stated, "Mortgage rates were down following the release of first quarter real GDP final estimate, which fell at a 2.9 percent annualized rate, a steeper than expected decline and the worst reading since the first quarter of 2009. Also, the seasonally-adjusted S&P/Case-Shiller 20-city home price index was up only 0.2 percent in April from the previous month. On a year-over-year basis, prices remained strong in April up 10.8 percent, but slower than the 12.3 percent in March."*
HUD and Treasury Working Together to Create More Affordable Rental Housing
The Treasury Department and the Department of Housing and Urban Development (HUD) are teaming up to create and preserve more affordable rental housing.
“As we make it easier for responsible home buyers to get credit, we also need to make sure families who do not want to buy a home or cannot afford to buy a home have access to affordable rental housing,” said Treasury Secretary Jacob Lew last week during remarks at the Making Home Affordable Summit. “Renting is the right choice for many Americans, and there’s more we can do to support renters. We are taking an important step to increase the availability of affordable rental housing.”
Under a new partnership with HUD, Treasury will reduce the interest rate for affordable multifamily housing compared with the cost of tax-exempt bonds under current market conditions. The Federal Financing Bank will use its existing authority to finance multifamily loans under the Federal Housing Administration’s (FHA’s) risk-sharing programs.
“To help the many hard-working families who cannot find affordable rental housing, we are partnering with the Treasury Department to broaden our efforts to create and preserve safe, decent, and affordable rental housing by allowing more housing finance agencies access to the capital they need to build or maintain affordable multifamily apartment buildings,” said Carol Galante, FHA commissioner and HUD assistant secretary for housing.
Treasury and HUD are working with the New York City Housing Development Corp. (HDC) to close the first project under this initiative this fall. The project would help rehabilitate affordable rental housing in Far Rockaway, Queens, that was damaged by Superstorm Sandy.
HUD through FHA would provide mortgage insurance pursuant to a risk-sharing agreement with HDC, and the Federal Financing Bank would finance the HDC mortgage loans.
Lew also announced that the Obama administration will be extending Making Home Affordable for another year to continue to help homeowners who are facing foreclosure or are underwater.
Wrapping up his remarks, Lew urged Congress to continue its housing reform efforts.
“While we remain committed to helping secure affordable and sustainable housing for all Americans, we cannot act alone. It’s time for Congress to pass housing reform legislation,” Lew said. “The work of the Senate Banking Committee was an important milestone on the road to reform, but lawmakers need to keep moving forward. We know we can create a better system that provides responsible Americans with mortgage credit while supporting affordable rentals for those who choose not to buy.”**
Senior Housing Finance Activity
Here’s a roundup of some of the most recent financing transactions in senior housing and care.
Greystone Provides $33M HUD Loan to Refinance SNF in Bronx, N.Y.
Greystone, a national provider of multifamily and healthcare mortgage loans, provided a $32.6 million HUD loan to refinance a 480-bed skilled nursing facility in Bronx, NY. The transaction was originated by Fred Levine, a senior mortgage originator at the firm.
The FHA financing was provided for Bay Park Center for Nursing and Rehabilitation, a nursing home and rehabilitation center located on Co-op City Boulevard. Greystone previously provided financing for 801 Co-op City Blvd’s acquisition of the facility with a bridge loan in 2008 and permanent HUD loan in 2009, now refinanced with this latest transaction. The facility is part of the SentosaCare Network in New York.
“We are thrilled to have been able to work with the same team from the acquisition bridge loan to the HUD take out and now the refinancing,” says Ben Philipson, president of SentosaCare, in a news release, adding that Greystone is familiar with SentosaCare properties.
The refinancing will benefit Bay Park Center for Nursing and Rehabilitation’s residents for years to come, says Betsy Vartanian, head of FHA lending at Greystone, in the same release.
Greystone provides mortgage finance solutions across multiple platforms, including FHA, Fannie Mae, Freddie Mac, USDA, CMBS, bridge, mezzanine and other proprietary loan programs. In 2013, Greystone ranked #1 in combined multifamily and healthcare FHA lending, #3 in Affordable Housing volume as a Fannie Mae DUS lender, and as a top-5 Freddie Mac lender for seniors housing.
Cambridge Arranges $5.2M HUD Lean Loan to Refinance Skilled Nursing, Rehabilitation Center in Colo.
Cambridge Realty Capital Companies arranged a $5.2 million HUD Lean loan to refinance the Broomfield Skilled Nursing Care and Rehabilitation Center located in Broomfield, Colo. The fully-amortized, 35-year loan was arranged for the owner, a Colorado limited partnership, using HUD Section 232 pursuant to Section 223(a)(7)funding program, says Jeffrey A. Davis, Cambridge Chairman, in a news release. Cambridge Realty Capital Ltd. of Illinois underwrote the transaction.
Broomfield Skilled Nursing Care and Rehabilitation Center is a 210-bed skilled care nursing facility. The facility provides short-term rehabilitation services, wound care, hospice care, respite care. Broomfield Skilled Nursing and Rehabilitation Center is staffed seven days a week with registered nurses, licensed practical nurses and certified nursing assistants.
Cambridge Arranges $12.5M HUD Loan to Refinance ALF in Ill.
Cambridge Realty Capital Companies arranged a $12.5 million HUD Lean loan to refinance The Ponds of Wealshire Assisted Living facility located in Lincolnshire, Ill. The fully-amortized, 35-year loan was arranged for the owner, an Illinois limited liability company, using HUD Section 232 pursuant to Section 223(a)(7) funding program, says Jeffrey A. Davis, Cambridge Chairman, in a news release. Cambridge Realty Capital Ltd. of Illinois underwrote the transaction.
The Ponds of Wealshire is a 141-bed assisted living facility. The facility provides rehabilitation services, respite care and progressive memory care.
Cambridge Arranges $10M HUD Lean Loan to Refinance Calif. Skilled Nursing Care, Assisted Living Hospital
Cambridge Realty Capital Companies arranged a $10 million HUD Lean loan to refinance the Santa Anita Convalescent Hospital located in Temple City, CA. The fully-amortized, 30-year loan was arranged for the owner, a California corporation, using HUD Section 232 pursuant to Section 223(a)(7) funding program, says Jeffrey A. Davis, Cambridge Chairman, in a news release. Cambridge Realty Capital Ltd. of Illinois underwrote the transaction.
The loan was coordinated by Hymie Barber, the national originations manager for Cambridge and the managing director of Catalyst/Cambridge Health Care Finance in Los Angeles, Calif.
Santa Anita Convalescent Hospital is a 541-bed facility offering skilled nursing care and assisted living. There are 391 skilled nursing care beds and 150 assisted living beds.
Capital One Bank Closes $14.6M FHA Loan to Refinance Fla. ALF
Capital One Specialty Healthcare Real Estate, part of Capital One Bank’s Commercial Real Estate Group, provided a $14.6 million HUD 232/223(f) loan to refinance Tequesta Terrace, a 100-bed assisted living facility in Tequesta, Fla. The transaction was originated by Carolyn Whatley, senior vice president of originations, headquartered in the company’s Palm Beach office.
Tequesta Terrace is owned by Terrace Communities, which also owns assisted living communities in Vermont, New Hampshire, Maine, and Florida.
“We develop financing alternatives that meet [borrowers’] requirements in different ways,” Whatley says in a news release. “Whenever possible, we want to offer alternatives.”
In this case, Whatley and her team presented the borrowers with various structures. After weighing the options, the partners chose HUD’s refinance program because it fits well with their strategy as long-term holders of the property, Capital One Bank says.
At the same time, the loan is assumable and can be prepaid, so it provides flexibility in the event their goals change. Capital One Bank is a Fannie Mae lender, a Freddie Mac Program Plus lender and a MAP- and LEAN-approved HUD lender.
The non-recourse, 35-year fixed rate loan was financed under the HUD 232/223(f) program and was underwritten under the LEAN process. In addition to Tequesta Terrace, Capital One Multifamily is refinancing two other properties owned by Terrace Communities, both located in New Hampshire.
Tequesta Terrace was built in 2001. It has 71 assisted living units with six different floor plans, from luxury studios to two-bedroom units. All units have kitchenettes, individually controlled heating and air conditioning, and carpet and vinyl flooring. Some apartments have private patios. The memory care unit has 29 beds, with both private and semiprivate suites available.
Housing & Healthcare Finance Closes $68.7 HUD Loan for N.J. Skilled Nursing Facility
Housing & Healthcare Finance (HHC Finance) closed a $68.7 million HUD loan for a skilled nursing facility purchased by Flushing, N.Y. based Center Management Group in December 2012. The 547 bed, 234 unit skilled nursing facility, located in Lincoln Park, N.J., is the largest privately operated nursing home in the state.
The facility is currently at 98% occupancy. The HUD loan refinanced all of the existing debt plus financed capex. Lisa Erdelyi from HHC Finance was the underwriter on the loan. ***
- Gill Group plans to provide RAD and Affordable Housing Training July 29th - 30th in Alexandria, LA.
- Cash Gill will be giving a lecture on Appraisals, Market Studies, Rent Comparability Studies and Capital Needs Assessments (CNAs)
- Gill Group plans to attend the Texas Affiliation of Affordable Housing Providers' Annual Conference July 28th - 30th in Austin, TX.
- Jerry Anderson will be presenting on the "Rental Assistance Demonstration" panel
- Gill Group plans to attend the National Housing & Rehabilitation Association's Summer Institute August 16th - 17th in Newport, RI.
- Gill Group plans to attend the Southeastern Affordable Housing Management Associations Regional Conference for Affordable Housing August 10th - 12th in Ft. Lauderdale, FL.
- Cash Gill will be giving a lecture on Rent Comparability Studies
- Gill Group plans to attend the Midwest Buyers/Sellers Conference August 18th - 19th in Indianapolis, IN.
- Cash Gill will be giving a lecture on Appraisals and CNAs
- Gill Group attended the National Council of State Housing Agencies’ Annual Housing Credit Connect June 25th – 27th in Chicago, IL.
- Cash Gill presented on a panel on Thursday, June 26th, entitled “Rural Development Opportunities.”
- Jerry Anderson presented on a panel on Thursday, June 26th, entitled “RAD Report.”
- Cash Gill attended the Missouri Real Estate Appraisers Commission’s Quarterly Meeting as an Active Commissioner June 17th – 18th in Jefferson City, MO.
- Gill Group attended National Association of Housing and Redevelopment Officials’ Annual Conference June 16th – 17th in Orlando, FL.
- Cash Gill presented on a panel on Monday, June 16th, entitled “Affordable Housing Appraisals, Market Studies, Rent Comparability Studies and Rent Reasonableness Studies.”
- Gill Group attended HUD’s RAD Training June 4th – 5th in Washington, DC.
- Gill Group provided affordable housing and RAD training at Great Lakes Capital Fund’s University of Affordable Housing May 22nd in South Bend, IN.
- Gill Group attended the Council for Rural Housing & Development of Ohio’s Midwest Rural Housing Summit May 19th – 20th in Columbus, OH.
- Cash Gill will be speaking on the Rural Housing Market Research panel on May 20th.
- Gill Group provided affordable housing training at a regional seminar April 29th in Franklin, TN.
- Gill Group attended Bank of Advance’s Annual Retreat and Meeting March 20th – 22nd in Norfolk, AR.
- Cash Gill attended the Missouri Real Estate Appraisers Commission’s Quarterly Meeting as an Active Commission March 18th – 20th in Jefferson City, MO.
- Gill Group attended MACO’s Annual Retreat and Meeting March 13th – 16th in Biloxi, MS.
- Gill Group attended the National Housing and Rehabilitation Association’s (NH&RA’s) Annual Meeting February 19th – 22nd in Palm Beach, FL
- Gill Group attended the Council for Affordable Rural Housing’s (CARH’s) Mid-Year Meeting January 26th – 28th in Las Vegas, NV.
- Gill Group attended 22 conferences and meetings throughout the United States in 2013
GROWTH (2013 - Highlights):
- Gill Group expanded our cutting-edge market analysis software and added our own in-house developed needs assessment software for CNAs, PNAs, PCNAs, PCAs, RPCAs, and every other acronym for this type of service.
- Gill Group added 4 offices with appraisers, market analysts, engineers and architects.
- Within the offices are three architects, one MAI appraiser, two general certified appraisers, five market analysts and 10 additional support staff.
- Gill Group expanded the footprint of its subsidiary, National Title & Escrow, to cover the entire United States with a local presence.
- Gill Group attended 20 conferences and meetings throughout the United States in 2012
GROWTH (2012 - Highlights):
- Gill Group developed cutting-edge market analysis software that will allow us to do preliminary analysis that is subject-specific in any market in the United States within minutes.
- Gill Group added 11 offices with appraisers, market analysts, engineers and architects.
- The offices now employ an additional 34 people.
- Gill Group expanded coverage of its subsidiary, National Title & Escrow, to cover the entire United States.
- Gill Group expanded coverage of its subsidiary, Gill Insurance Group, to cover the entire United States.
Gill Group has published the following:
- New York Real Estate Journal - How can low-income housing facilities translate into high profits?
- New York Real Estate Journal - Up, up and away: Home mortgage interest rates and gasoline prices continue ascending.
- Tax Credit Advisor - Boston MSA Market Snapshot
- Tax Credit Advisor - Seattle MSA Market Snapshot
- Northeast Industrial Development Resource Guide - What Appraisers Know About Investing.
- Affordable Housing Finance – Urban and Rural Market Studies.
- Tax Credit Advisor – LIHTC Appraisals 101
Cash Gill, MAI has had the opportunity to speak on the following topics:
- (Indianapolis, IN) National Council of Affordable Housing Market Analysts - Maximize Your Market: Understanding the Methodology Behind Market Studies.
- (Reno, NV) Nevada Council of Affordable and Rural Housing - Don't Get Caught in the Red. New Guidelines for Audits and Inspections.
- (Washington, DC) The Institute for Professional and Executive Development - Nonrecourse HUD Deals - So You Closed Your Nonrecourse HUD Deal. Now What? And Is It Really Nonrecourse?
- (Arlington, VA) Council for Affordable and Rural Housing - Property Valuation: The Correct Way to Value Properties.
- (New Orleans, LA) National Council of Affordable Housing Market Analysts - Affordable Housing Site Analysis
- (Las Vegas, NV) Nevada Council of Affordable and Rural Housing - Auditing and Accounting Guidelines for Section 42 Low Income Housing Tax Credits.
- (Washington, DC) Council for Affordable and Rural Housing - Rural Development Appraisals and Market Studies
- (Miami, FL) Council for Affordable and Rural Housing - The Equity Market - Impact on Rural Housing
- (Washington, DC) Council for Affordable and Rural Housing - How to Foster Affordable Green and Rural Housing Needs Assessments
- (Indianapolis, IN) Affordable Housing Association of Indiana - Market Analysis – Best Ways Use Market Studies to Ensure Application Points
- (Portland, ME) Enterprise Buyer/Seller Conference for RRH 515 Properties – Valuing the Product. What Is My Development Worth?
- (Washington, DC) National Housing and Rehabilitation Association – Financing and Underwriting Special Needs Housing.
- (Atlanta, GA) National Council of State Housing Agencies – Comprehensive Market Analysis.
- (Chicago, IL) AHF Live – Strategies for Rural Deals.
- (Dallas, TX) Crittenden Multifamily – Financing Special Use Properties.
- (Washington, DC) Council for Affordable Rural Housing – Rural Housing Preservation
- (Denver, CO) National Council of State Housing Agencies – Rural Housing Strategies
- (Denver, CO) National Council of State Housing Agencies – Y15: Preservation and Disposition Seminar
- (San Antonio, TX) Rural Rental Housing Association – LIHTC Legislative Update
- (Key Largo, FL) Council for Affordable Rural Housing – How National Appraisal Practices Impact USDA Assisted Properties
- (San Francisco, CA) National Council of State Housing Agencies – Changes and Challenges in Rural Housing Development
- (Chicago, IL) AHF Live – Preservation of Older LIHTC Deals
- (Franklin, TN) Regional Affordable Housing and RAD Training – Valuation, Feasibility and Capital Needs Assessments
- (Columbus, OH) Council for Rural Housing & Development of Ohio – Rural Housing Market Research
- (South Bend, IN) Great Lakes Capital Fund’s University of Affordable Housing – Valuation Risks Using Financing for RAD Deals
- (Chicago, IL) National Council of State Housing Agencies – Rural Development Opportunities
- (Orlando, FL) National Association of Housing and Redevelopment Officials – Affordable Housing Appraisals, Market Studies, Rent Comparability Studies and Rent Reasonableness Studies
- (Alexandria, LA) Regional Affordable Housing and RAD Training – Valuation, Feasibility and Capital Needs Assessments (Upcoming)
- (Ft. Lauderdale, FL) Southeastern Affordable Housing Management Association (SAHMA) – Rent Comparability Studies 101 (Upcoming)
- (Indianapolis, IN) Midwest Buyer/Seller Conference – CNAs and Appraisals (Upcoming)
*as seen on multifamilybiz.com
**as seen on housingfinance.com
***as seen on seniorhousingnews.com