Just Released Fourth Quarter 2014 Leading Income Rental Markets

Palos Verdes, CA. The Center for Real Estate Studies (CRES) has just released their fourth quarter 2014 issue of "Market Cycles". It gives a forward look at more than 150 income rental markets with "buy and sell" recommendations. End Quote

(1888PressRelease) January 11, 2015 - The current number of markets in the "Sell Phase" is thirty-five, according to Eugene E. Vollucci, Director of CRES. The number of markets in the "Buy Phase" is nine. Mr. Vollucci states, "that this quarter the three top buy recommendations are Asheville, NC, Austin, TX and Toledo, OH. The three top sell recommendations are Columbus, OH, Honolulu, HI and Richmon, VA."

"There's a strong eagerness for rental units," Mr. Vollucci says. "As long as the economy still is not performing at its best, there's enough drive to stimulate significant growth of renter households. Because potential homebuyers are still not a major factor, the overall performance in the apartment demand continues to increase apartment occupancy across the nation's 100 largest markets registered at 95.7 percent as of the third quarter."

The apartment rent growth will continue to accelerate during 2015. Based on this year's effective rents, new leases should show an annual rent growth of 3.9 percent

Looking forward, there is evidence that urban supply will continue to swell. Similar to 2014's track record, seven of the top 10 projected new-supply submarkets for 2015 are "urban core," according to Axiometrics (another is Brooklyn, N.Y.), and the markets at the top of the 2016 deliveries list are in New York City and San Francisco.

Hang on tight-optimistic projections that apartment markets can absorb high levels of new construction are going to be tested soon. Developers will start construction on 405,000 units of multifamily housing in 2015, according to the 2015 Dodge Construction Outlook. To fill all of these new units, they will need all of the increased demand that markets analysts are hoping for, as a healing economy helps young people now living with parents or roommates to form their own households.
The U.S. economy has created more than 200,000 new jobs a month for most of 2014. If the recovery continues, new household formation will support strong demand for multifamily housing of more than 400,000 units a year from 2015 to 2017, compared to the average of just 296,000 apartments completed annually from 2012 to 2014, according to data firm RCLCO, a real estate advisory firm.

"Demographics are supporting demand," says Ryan Severino, senior economist with New York City based research firm, Reis Inc. "The most common age in the United States is 22, followed closely by 23, and then 21. There are many young people in the market that are predominantly renters and not homeowners. This will continue to provide significant demand

According to the Urban Land Institute, with home prices rising and people keen to be close to the urban core, some developers are discovering opportunities in purpose-built multiresidential development or redevelopment. Increasing location density, or adding a retail component to the mix, could prove key to making the economics work. Investors also are taking an interest in multiresidential properties, seeing them as a way to lock in income and potentially realize significant upside at the end of the term. Patience will be key: rent controls and other factors may put some limits on the returns that investors can expect, and "making the numbers work" is still project-specific. Rental projects may also require significant amounts of ongoing investment to keep the product quality at a level where it can compete with rental stock represented by newer condominiums.

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