Mark Obrinsky at the Apartment Strategies ConferencePresentation Transcript
Economic and Apartment Market Outlook May 2010
Road To Recovery
Are We On The Cusp Of A Sustained Recovery?
Or Do Recent Indicators Reflect Only Temporary Strength?
The Recovery Appears Underway GDP Growth Source: Bureau of Economic Analysis; NMHC.
JOB GROWTH IS KICKING INTO GEAR EMPLOYMENT: LEADING INDICATORS (YEAR-OVER-YEAR GROWTH)
Employment Growth is Expected to Gain Momentum in 2011 and 2012 – Could It Surprise to the Upside? Sources: Marcus & Millichap Research Services, BLS Change Historical Avg. Emp Growth ** Based on employment for the 12 months after the contraction period ***Based on employment for the 2 nd and 3 rd years after the contraction period * Forecast
Job Growth is Critical to Renter Household Formation and Apartment Occupancies – Where Will It Come From? Apartment Vacancy Rate Unemployment Rate * Through 1Q Sources: Marcus & Millichap Research Services, BLS, Reis
EXPORTS WILL ALSO HELP
Yield Curve Signals Stronger Economic Expansion Than Most Forecasts Spread between 10yr Note and 3mth Bill * Through April Recessions * Through April Sources: Marcus & Millichap Research Services, Federal Reserve
U.S. Household Debt as a Percent of GDP Source: Federal Reserve Board; NMHC.
PUBLIC DEBT POSES LONG-TERM RISKS FEDERAL DEBT HELD BY THE PUBLIC (% OF GDP)
The For-Sale Housing Market What Kind Of A Recovery? And When?
Homeownership Well Below The Peak Source: Census Bureau.
5% 10% 15% 20% Percentage Ratio of Median Home Price to HH Income Mortgage Rate YOY Change in Median Home Price HOME OWNERSHIP IS MUCH MORE AFFORDABLE As of: 10Q1 Sources: Freddie Mac, Moody’s Economy.com, NAR 0 1 2 3 4 5 6 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Ratio (20%) (15%) (10%) (5%) 0%
87 89 91 93 95 97 99 01 03 05 07 09 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Past Due 30 Days Past Due 60 Days Past Due 90 Days Percent of All Loans Started Foreclosure Percent of Loans Past Due (SA) Foreclosures Started as Percent of All Loans FORECLOSURE ACTIVITY ISN'T OVER Sources: MBA, Moody’s Economy.com As of: 09Q4 0 2 4 6 8 10 12 79 81 83 85
Homeowner Vacancy and Renter Occupied Housing Source: Census Bureau; NMHC.
ANYONE WANNA BUY A SINGLE FAMILY HOUSE? As of: 10Q1
The Apartment Market Will Too Little Supply Give Way To Too Little Demand? When?
“ Shadow” Market a Significant Factor in High Vacancies – More in Select Metros Total Vacant Units (in 000s) Sources: Marcus & Millichap Research Services, U.S. Census Bureau
Beyond Stabilization in 2010, Apartments Will Likely Enter Rapid Recovery Number of Units (000s) Average Vacancy Rate * Forecast Sources: Marcus & Millichap Research Services, Reis
Trends in Young Adults Living at Home Point to Significant Pent-Up Renter Demand Living with Parents (millions) Note: Unmarried college students living in dormitories are counted as living in their parents home Sources: Marcus & Millichap Research Services, Bureau of Census 2005-2009 Increase: 2.2 Million
APARTMENT PRICING LOOKS TO BE RECOVERING Source: CoStar Group As of: April 2010
U.S. Quarterly Apartment Sales Trends Capital Flows Favoring Apartments Total Dollar Volume ($Bil.) Total Transactions (Ths.) Total Dollar Volume Total Transactions * Preliminary Estimate Includes transactions sold for $1,000,000 and greater Excludes Archstone Privatization Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
24 – Month Cap Rate Adjustment Matrix * Primary Secondary Tertiary Class “A” Class “B” Class “C” 1.00 1.25 1.75 1.25 1.75 2.25 2.25 2.75 2.00 * Change in cap rates last 24 months
TRADING IN MAJOR COASTAL METROS IS SKEWING THE AVERAGE Sources: PPR, CoStar Group As of: 10Q1
MULTIFAMILY DISTRESSED AND NON-DISTRESSED SALES Non-distressed Sales Distressed Sales Distressed Sales as % of Total 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 1998 1q 1999 1q 2000 1q 2001 1q 2002 1q 2003 1q 2004 1q 2005 1q 2006 1q 2007 1q 2008 1q 2009 1q 2010 1q 0% 5% 10% 15% 20% 25% 30% Number of Transactions Percentage of Distressed Transactions Sources: PPR, CoStar Group