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- 1. State of theApartment Market September 2010
- 2. 1 Real GDP Consumption Investments Net Exports Government 6.0% 5.0% 1.0% Excl. Growth in Private 5.0% Inventories 4.0% 3.7% 3.0% GDP %s 2.0% 1.6% 1.0% 0.0% -1.0% -2.0% 2.1% Excl. Growth in 1.2% Excl. Growth in Private -3.0% Private Inventories Inventories -4.0% 4Q09 1Q10 2Q10
- 3. Inflation Not aThreat Yet 20% CPI-Total 15% CPI-Core 10% 5% 0% -5% -10% -15% 1970 1975 1980 1985 1990 1995 2000 2005 2010
- 4. Jobs Lost inRecessions As Share of Peak 2007 excluding temporary Census jobs 1948 1953 1957 1960 1970 1973 1980 1981 1990 2001 2007 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 Months from Onset of Recession
- 5. NMHC Market TightnessIndex 100 75 50 25 0 Jul Jan Jul Jan Jul Jan Jul Jan 1999 2001 2002 2004 2005 2007 2008 2010
- 6. Still Too ManyVacant Housing Units 7,000 6% Vacant (000s, left scale) 6,000 5% Vacant share (right scale) 5,000 4% 4,000 3% 3,000 2% 2,000 1% 1,000 0 0% 1990 1995 2000 2005 2010
- 7. Housing Inventory RemainsHigh (Months’ Supply of Existing Homes) 20 Single-family 15 Condo 10 5 0 2000 2002 2004 2006 2008 2010
- 8. Young Adults Livingat Home Trend Suggests Significant Pent-Up Demand 21 30% Number (millions) 20 Share 29% 19 28% 18 27% 17 26% 16 25% 1983 1987 1991 1995 1999 2003 2007
- 9. Why the Long-TermOutlook for U.S. Apartments Should Be Favorable Will we finally see sweeping change in favor of the density, efficiency, flexibility and affordability of apartment living? If so, what will drive it? 1. Population growth 2. Echo boomers (and Millennials) 3. Changing household composition 4. Continued immigration 5. Environmental concerns 6. Affordability (in the post-crash world) 7. Bloom off the rose of homeownership
- 10. Population Growth •The U.S. population is expected to increase 33% by 2030 to 376 million. • That’s 94 million more people than there were in 2000. • To accommodate that growth, we need 60 million new housing units.
- 11. Baby Boomers • 78million strong, 45 million households. • If only a small percentage migrate to rental housing, the new demand is tremendous. Relocation Choices of Seniors Renter Before Move 20% Renter After Move 59%
- 12. Echo Boomers andMillennials A Continuing Stream of Young People Millions 5 4 3 2 1 1933 1943 1953 1963 1973 1983 1993 2003 Source: National Center for Health Statistics.
- 13. Immigration Set aNew Record In the First Decade of the 21st Century Millions 12 10 8 6 4 2 0 1820s 1840s 1860s 1880s 1900s 1920s 1940s 1960s 1980s 2000s
- 14. Changing Household Composition •For 50 years, married couples with children drove America’s housing industry. But now they account for less than 22% of all households and that number is falling Household Type 1970 2030 HH with Children 45% 27% HH without Children 55% 73%
- 15. Changing Household Composition Household Growth, 2000 - 2040 7 million 47 million 14% 86% With Children Without Children
- 16. Declining Homeownership Rates •2009 Survey: 49% don’t believe homeownership is a realistic wealth-building strategy. • It costs $200 less per month, on average, to rent than to own. • A $100 investment in housing in 1985 would be worth $240 today, while that same $100 invested in stocks would be worth $1,116—more than four-and-a-half times as much.
- 17. Declining Homeownership Rates 70% 68% 64% 66% 64% 62% 62% 60% 1995 2000 2005 2010 2015 » Source: Harvard University, State of the Nation’s Housing 2009
- 18. Future Housing Demand: ShiftingTenure Implications U.S. Household Growth Projection 2008 - 2015 » Source: Prof. Chris Nelson, Univ. of Utah
- 19. Supply Trends Starts, Completions, Period Annual Average Annual Average 1999 – 2008 297,000 278,000 2009 97,000 259,000 2010 (est.) 85,000 135,000
- 20. Multifamily Mortgage CreditExtended, 2008Q1 – 2010Q1 $ Billions 80 60 40 20 0 -20 -40 Total Banks Life GSEs Ginnie CMBS Other Cos. Source: Federal Reserve Board; NMHC.
- 21. Bank Lending NotBack To Normal 100% 80% 60% Excess Reserves (share of total reserves) 40% 20% 0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
- 22. U.S. Quarterly ApartmentTransactions $ Billions 40 35 30 25 20 15 10 5 0 01 04 07 10 20 20 20 20
- 23. National Apartment Priceand Cap Rates (000) $140 10% Price Per Unit $120 Cap Rate 9% $100 $80 8% $60 7% $40 6% $20 $0 5% 2001 2003 2005 2007 2009
- 24. Financial Regulatory Reform: Impact on Commercial Real Estate • Added regulation and higher costs, which could be passed on to borrowers, but most onerous provisions revised. o Risk Retention Provisions o CMBS Ratings Changes o Costly “End-User” Derivatives Regulations • More than 200 regulatory rulemaking procedures expected to implement it. (Sarbanes-Oxley had 16!)
- 25. Next Up: GSEReform • Making the case for multifamily o We weren’t part of the problem – don’t throw the baby out with the bath water! o The nation is increasingly relying on rental housing, but private capital cannot meet 100% of the industry’s needs o A federally backed secondary market is critical to the industry’s health • The process: a marathon, not a sprint.
- 26. Other Legislative Threats •Carried Interest • National Energy Efficiency Building Code/Green Building Mandates • Card Check/Unionization Legislation • Tax Law Changes
- 27. Conclusion • Short-Term: Jobs,Jobs, Jobs • Longer Term: Positive Demographics
- 28. 1 Thank You Douglas M. Bibby President National Multi Housing Council Web Site: www.nmhc.org E-Mail: info@nmhc.org Phone: 202/974-2300