the economic backdrop - nmhc | home · 10,000. 15,000. 20,000. 25,000. 30,000. 35,000. 1q11 2q11...

The Economic BackdropWhen will this cycle end?

11

35

57

72

87

91

105

119

0 25 50 75 100 125

Aug-80-Jun-81

Dec-70-Oct-73

Apr-75-Dec-79

Dec-01-Nov-07

Jul-09-????

Dec-82-Jun-90

Mar-61-Nov-69

Apr-91-Feb-01

Length of economic expansions (months)

Jan-

17

Mar

-18

May

-19

How far are we into the current economic expansion?Current expansion in 8th year; 4th longest since 1960

Source: NBER and Moody’s Analytics with data through October 2016.

Macro economic trends

Source: Moody’s Analytics, ECA, FRB, BLS, S&P Dow Jones Indices LLC, CoreLogic, Inc, FHFA, Freddie Mac, Fannie Mae

Labor market trends

Apartment Market ConditionsAre we at an inflection point?

Head-to-HeadWhich market has the better outlook over the next 12 months?

3Q-2015 3Q-2016 Chg 3Q-2015 3Q-2016 ChgJob growth (Y/Y) 58,200 65,800 13% 47,200 46,700 -1%

3.2% 3.5% 30 3.5% 3.3% (15)

Occupancy rate 95.8% 95.6% (20) 95.8% 94.9% (90)

Rent growth (Y/Y) 7.9% 6.4% (152) 9.8% 2.2% (753)

MF permits (T12M) 16,052 11,709 -27% 7,926 8,910 12%SF permits (T12M) 8,493 9,540 12% 8,573 9,934 16%Total permits (T12M) 24,545 21,249 -13% 16,499 18,844 14%

SEATTLE DENVER

3Q-2015 3Q-2016 Chg 3Q-2015 3Q-2016 ChgJob growth (Y/Y) 77,100 72,000 -7% 108,300 102,100 -6%

3.1% 2.8% (29) 4.7% 4.2% (47)

Occupancy rate 94.9% 94.9% 0 95.7% 95.6% (10)

Rent growth (Y/Y) 6.8% 5.4% (140) 6.2% 4.7% (150)

MF permits (T12M) 9,740 12,507 28% 19,962 21,532 8%SF permits (T12M) 19,276 21,998 14% 19,962 22,776 14%Total permits (T12M) 29,016 34,505 19% 39,924 44,308 11%

ATLANTA DALLAS


3.4% 2.3% (113) 3.5% 2.2% (129)

Occupancy rate 95.8% 94.7% (110) 94.7% 94.7% 0

Rent growth (Y/Y) 5.6% 3.0% (260) 7.4% 6.3% (110)

MF permits (T12M) 12,565 14,069 12% 6,108 7,305 20%SF permits (T12M) 6,945 6,663 -4% 14,972 18,159 21%Total permits (T12M) 19,510 20,732 6% 21,080 25,464 21%

SOUTH FLORIDA PHOENIX


4.7% 3.2% (143) 3.7% 3.5% (17)

Occupancy rate 95.6% 95.3% (30) 96.4% 96.1% (30)

Rent growth (Y/Y) 5.4% 2.7% (270) 6.9% 5.4% (150)

MF permits (T12M) 9,796 9,084 -7% 6,716 8,382 25%SF permits (T12M) 11,731 12,724 8% 10,395 11,614 12%Total permits (T12M) 21,527 21,808 1% 17,111 19,996 17%

AUSTIN NASHVILLE


5.3% 2.3% (297) 2.4% 1.6% (79)

Occupancy rate 96.6% 95.7% (90) 97.0% 96.9% (10)

Rent growth (Y/Y) 11.5% -1.8% (1,330) 4.1% -0.2% (430)

MF permits (T12M) 4,544 4,513 -1% 59,398 28,926 -51%SF permits (T12M) 474 564 19% 6,472 6,501 0%Total permits (T12M) 5,018 5,077 1% 65,870 35,427 -46%

SAN FRANCISCO NEW YORK


3.6% 2.4% (112) 3.4% 1.9% (144)

Occupancy rate 96.4% 95.4% (100) 95.7% 96.1% 40

Rent growth (Y/Y) 14.8% 4.0% (1,080) 7.8% 5.3% (250)

MF permits (T12M) 5,460 7,691 41% 4,391 8,273 88%SF permits (T12M) 6,532 7,561 16% 3,045 2,602 -15%Total permits (T12M) 11,992 15,252 27% 7,436 10,875 46%

PORTLAND SAN DIEGO

3Q-2015 3Q-2016 Chg 3Q-2015 3Q-2016 ChgJob growth (Y/Y) 46,900 53,900 15% 41,100 38,000 -8%

4.2% 4.6% 43 3.4% 3.0% (36)

Occupancy rate 96.1% 96.0% (10) 95.8% 95.6% (20)

Rent growth (Y/Y) 7.7% 4.8% (290) 6.4% 5.7% (70)


ORLANDO TAMPA

3Q-2015 3Q-2016 Chg 3Q-2015 3Q-2016 ChgJob growth (Y/Y) 49,600 12,100 -76% 63,700 81,400 28%

1.7% 0.4% (128) 2.0% 2.6% 52

Occupancy rate 94.7% 93.2% (150) 95.6% 95.7% 10

Rent growth (Y/Y) 3.2% -2.7% (590) 1.8% 2.2% 40

MF permits (T12M) 24,190 11,769 -51% 10,226 11,318 11%SF permits (T12M) 37,563 35,431 -6% 12,170 12,867 6%Total permits (T12M) 61,753 47,200 -24% 22,396 24,185 8%

HOUSTON WASHINGTON, DC


1.7% 1.4% (32) 2.3% 1.8% (54)

Occupancy rate 95.6% 95.2% (40) 96.3% 96.0% (30)

Rent growth (Y/Y) 3.8% 2.2% (160) 6.8% 3.9% (290)

MF permits (T12M) 6,952 9,098 31% 16,747 14,923 -11%SF permits (T12M) 7,760 7,873 1% 4,519 4,779 6%Total permits (T12M) 14,712 16,971 15% 21,266 19,702 -7%

CHICAGO LOS ANGELES

3Q-2015 3Q-2016 Chg 3Q-2015 3Q-2016 ChgJob growth (Y/Y) 78,328 46,958 -40% 47,500 54,100 14%

3.0% 1.8% (127) 1.7% 1.9% 20

Occupancy rate 96.2% 95.9% (30) 95.7% 95.0% (70)

Rent growth (Y/Y) 5.2% 2.4% (280) 4.1% 0.9% (320)

MF permits (T12M) 7,884 7,555 -4% 5,297 4,864 -8%SF permits (T12M) 4,738 5,224 10% 6,374 6,809 7%Total permits (T12M) 12,622 12,779 1% 11,671 11,673 0%

PHILADELPHIABOSTON


3.6% 2.6% (107) 4.3% 2.7% (159)

Occupancy rate 95.9% 95.9% 0 95.5% 95.6% 10

Rent growth (Y/Y) 6.2% 4.1% (210) 6.1% 3.9% (220)

MF permits (T12M) 6,639 7,023 6% 4,073 3,262 -20%SF permits (T12M) 11,567 12,654 9% 8,353 9,185 10%Total permits (T12M) 18,206 19,677 8% 12,426 12,447 0%

RALEIGHCHARLOTTE


3.8% 2.8% (104) 3.9% 2.9% (100)

Occupancy rate 95.9% 95.9% 0 95.5% 95.6% 10

Rent growth (Y/Y) 6.2% 4.1% (210) 6.1% 3.9% (220)


SALT LAKE CITY LAS VEGAS

SupplyAre we building too much?

National Pipeline ActivityOctober 2016 compared to one year ago

Source: Axiometrics

October 2015 October 2016

Pipeline Phase Units Pipeline Phase Units

Planned 805,228 Planned 1,009,844

Under Construction 542,213 Under Construction 595,450

Lease Up 131,751 Lease Up 159,545

Grand Total 1,479,192 Grand Total 1,764,839

Top Markets for Projects Under ConstructionOctober 2016 compared to one year ago

Source: Axiometrics

Under Construction Units Under Construction Units New York, NY 36,629 New York, NY 44,382

Dallas, TX 32,676 Dallas, TX 42,341

Houston, TX 31,446 Houston, TX 32,740

Washington, DC 21,430 Washington, DC 26,291

Seattle, WA 20,295 Los Angeles, CA 23,689

Los Angeles, CA 19,853 Atlanta, GA 21,897

Atlanta, GA 19,314 Seattle, WA 18,312

Denver, CO 16,707 Charlotte, NC 15,029

October 2015 October 2016

High Rise Projects (9 floors or higher) Built Since 2000 by Year

Includes conversions; Source: Axiometrics

0

20

40

60

80

100

120

Num

ber o

f Pro

pert

ies

Including these markets:2015• Baton Rouge, LA• Canton, OH• Greensboro, NC• Spartanburg, SC

2016• Des Moines, IA• Grand Rapids, MI• Madison, WI• South Bend, IN

How Unit Mixes Differ from Existing Stock

Source: Axiometrics

45%

55%53%47%

0%

10%

20%

30%

40%

50%

60%

Studio/One Two/Three

Existing Stock 2013 or Newer

When Will Supply Begin to Slow?

Source: Axiometrics

-

5,000

10,000

15,000

20,000

25,000

30,000

35,0001Q

112Q

113Q

114Q

111Q

122Q

123Q

124Q

121Q

132Q

133Q

134Q

131Q

142Q

143Q

144Q

141Q

152Q

153Q

154Q

151Q

162Q

163Q

164Q

161Q

172Q

173Q

174Q

171Q

182Q

183Q

184Q

181Q

192Q

193Q

194Q

19

Uni

ts

Dallas Houston Los Angeles New York Seattle Washington, DC

Sources: Axiometrics, Wall Street Journal

Annual Rent Growth by SubmarketSan Francisco Bay Area

Source: Axiometrics

2014 2015 Sept. 2016

<2%2%-4%4%-6%>6%

Annual Rent Growth by SubmarketAustin

Source: Axiometrics

Sept. 20162015

90%

91%

92%

93%

94%

95%

96%

97%

98%

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Occupancy Rate Long-Term Average

<2%2%-4%4%-6%>6%

Supply and Demand in Equilibrium

Concessions Seattle & Southern California

Source: Axiometrics

Concessions Houston & Dallas/Ft. Worth

Source: Axiometrics

AffordabilityHeadline or reality?

Reported Rent-to-Income RatiosAs of 2015

Sources: MPF Research/RealPage, SeekingAlpha.com, Zillow*prior to sale **based on leases tracked by RealPage software

Incomes are Growing Fast for Market-Rate Apt. RentersBased on Rent Roll Data

Sources: MPF Research/RealPage

Product Class, Rent-to-Income Inversely CorrelatedBased on Rent Roll Data


The Cheaper the Rent, the More Affordability is an IssueBased on Rent Roll Data


Demand & DemographicsMillennials vs. Boomers – how is demand shifting?

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Quarterly 4Q Moving Avg.

Homeownership rate: how low can it go?

Home ownership rate (%)

Source: US Census Bureau

2.8

0.7

-0.5

2.1

3.22.9

2.1

-1.5-2.0

5.5

4.0

2.1

3.1

5.56.1

-3

-2

-1

0

1

2

3

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5

6

7

2015-20 2020-25 2025-30

25-34 35-44 45-54 55-64 65-74 75+

Net population growth by age cohort (Mil.)

Source: US Census Bureau, National Population Projections 2014

41

Changing demographics: implications for demand?

Urban vs. SuburbanAre we overplaying the urban trend?

Chart provided by Dan Mahoney, LaSalle Investment Management

PredictionsWhat will 2017 hold?

the economic backdrop - nmhc | home · 10,000. 15,000. 20,000. 25,000. 30,000. 35,000. 1q11 2q11...

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