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Multi Family Sector2014 Review & 2015
Forecast
Todd Blonsley, MBA, CCIMVice President Investments
Thursday, January 15, 2015
Atlantis Casino Resort Spa
“Stability & Strength”
Tight lines and a fairly strong header for a closet
2014 Stability & Strength
The Economic Indicators 2014 U.S. GDP estimated to end at 5% (A Huge Recovery)
2015 Projections for U.S. GDP range from 3.0% to 3.3%
2015 Projections for Global GDP Growth at 2.9%
U.S. GDP Growth Averaged 3.24% (1947 to 2013)
U.S. Unemployment decreased from 7.0% (end 2013) to 5.8%
(end 2014) , which was a 17% decrease
Washoe County Unemployment decreased from 8.2% (end 2013) to 6.4%
(end 2014), which was a decrease of 22%
Remember when…Washoe County ended 2010 at 13.2% unemployment and
the current unemployment rate is 6.4% , a 52% decrease in four short years
Sources: U.S. Bureau of Labor Statistics, St. Louis Fed.The World BankThe Economist
Source: U.S. Dept. of Labor-Bureau of Labor Statistics
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%
2%
4%
6%
8%
10%
12%
14%
Historical Unemployment Rates Washoe County (1994 to 2014)
(November 1st of each year)
2.7%
4.2%4.4%
8.6%
13.2%
8.2%
6.4%
4.7%
2014 Influences on the Apartment Market
Washoe County home prices increased 9% from
Nov. 2013 to Nov. 2014
Home prices are expected to rise in 2015
No major apartment projects came on line
The factors above bolster improvements and
strength in the apartment market (i.e. rising rents
and continued declining vacancy rates)
Source: Reno-Sparks Association of Realtors*
2007 2008 2009 2010 2011 2012 2013 2014 20152%
3%
4%
5%
6%
7%
8%
9%
10%
$780
$800
$820
$840
$860
$880
$900
6.50%
9.63%
8.54%
7.16%
6.56%
5.60%
5.10%
4.35%
2.13%
$885
$875
$848
$824
$822
$834
$850
$865
$887
Reno-Sparks Apartments Historic DataYear Ending Vacancy Rate & Average Rent
2007-2012 = End of 4th Q2013 = Forecast End of 4th Q2014 = Forecast End of 3rd Q 2007-2012 Source: Johnson-Perkins & Associates, Inc
Apparently the Incas had a slight soil compaction problem in this one area
Apartment Sales 2014
Project Name City Sale Price Units Price/Unit Cap RateClosing
Date
Mountain View Apartments Reno $950,000 25 $38,000 - 5/8/2014
Banbridge Sparks $5,300,000 128 $41,406 6.37% 11/20/2014
Moran Apartments Reno $1,402,500 28 $50,089 - 7/29/2014
Green Leaf Pines Reno $5,925,000 116 $51,078 6.60% 1/28/2014
Carlin Apartments Reno $1,125,000 22 $51,136 7.25% 8/15/2014
Woodside Village Reno $14,900,000 250 $59,600 6.82% 1/23/2014
Talus Point Condominiums Reno $9,000,000 125 $72,000 5.75% 7/2/2014
310 Maine Street Reno $1,029,000 13 $79,154 - 5/7/2014
Eastland Hills Sparks $27,500,000 296 $92,905 6.01% 8/19/2014
The Alexander @ S. Virginia Reno $55,300,000 350 $158,000 5.65% 4/23/2014
2015 Outlook & Influencers
Continued Improving Employment RatesContinued Improving Consumer Confidence Leveling, but Stable Increases in U.S. GDP Modest increases in Apartment Supply (should be
easily absorbed, no negative effect on vacancy rates or average rents)
Housing Prices Rise (8%-12%) Similar to 2014Mortgage Rates Remain Low (3.25% to 4%)Regional Population & Job Growth = New Housing
Formation = Demand for Apartments and SFR
2015 Outlook & Influencers
#1 San Francisco, #3 San Jose, #4 Oakland, #6 San Diego, #8 Los Angeles (5 of the top 10 strongest apartment markets in the U.S. are in California = Nevada apartments benefit)
National vacancy rates dipped as low as 4.2% in 2014 and ended the year at 4.7%
Homeownership dropped to a 19-year low of 64.4% nationally (more renters by choice)
238,000 apartment units were completed in the U.S. in 2014 and all absorbed easily
210,000 units estimated for completion in 2015
2015 Outlook & Influencers
Nationally, 2014 apartment values were 13% above 2007 peak values (caused by cheap capital and soaring investor sentiment)
Existing Class A assets often priced at a premium to replacement cost (opportunity for new development or renovation of old assets)
Apartments are the most favored asset class due to the direct and immediate benefit that job growth and new housing formation provide
Probably not OSHA approved ladder & scaffolding
Multi Family 2015 Forecast
Vacancy Rate Ends 3Q 2015 at 3.2%
Slight uptick, but at the low end of our
long term healthy range of 3% to 5%
Average Rents Rise By 2.0% to End 3Q
2015 at $900
$900 Average Rent will be a first for the
Reno-Sparks area, a new benchmark