Rental Housing Journal Arizona
January 2017 - Vol. 9 Issue 1
2. The How and Why of Becoming a Really Likable Property Manager
4. Housing Data Reveals Gaps in Economic Opportunity Along Generational, Racial and Socio-Economic Lines
3. How to Find and Choose the Best Mortgage Lender for You
5. Dear Maintenance Men – Slab Leaks, Safety Bars and Shaky Ovens
7. U.S. Housing Worth Record-High $29.6 Trillion in 2016
FAU Buy vs Rent Index Shows Record High Home Prices in U.S. Housing Market Being Supported by Rising Rents
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3Q16 Market Overview Multifamily Housing Update
P Payroll Job Summary Total Payrolls 1,947.1m Annual Change 50.3m (2.6%) RCR 2016 Forecast 58.7m (3.1%) RCR 2017 Forecast 51.5m (2.6%) RCR 2018 Forecast 37.6m (1.9%) RCR 2019 Forecast 20.9m (1.0%) RCR 2020 Forecast 10.8m (0.5%) Unemployment (NSA) 4.5% (Oct.)
3Q16 Payroll Trends and Forecast In the wake of exceptionally strong job creation rates during the first half 2016, Phoenix job growth slowed after mid-year. Metro establishments hired at a 50,300-job, 2.6% year-on-year rate in 3Q16, compared to 1H16’s 65,400job, 3.5% surge. Weaker hiring was recorded in consumer-driven sectors and tech oriented services and manufacturing. On the consumer side, retail trade and personal service growth slowed to a 4,300-job, 1.5% annual rate in 3Q16, from 12,900 (3.0%) jobs in the previous quarter. On the tech side, attrition in
Phoenix Multifamily Investing Hits Record $4.5 Billion In 2016
hoenix multifamily investors have spent a record of $4.5 billion so far in 2016 in purchasing apartments in the Phoenix metro area, according to a release. Research from ABI Multifamily shows that year-to-date Phoenix just crested $4.5 billion in total transaction volume which is a record for the Metro, according to Thomas M. Brophy, director of research for ABI Multifamily. “As I’m sure many of you have read, there has been a significant uptick in the frequency of large deals closing in the Phoenix Metro,” Brophy said in the release. “It should be noted that a lot of these deals, as with many deals involving large properties, take months to put together. There is usually a rush to deploy capital prior to year-end,” he said to explain the timing.
“The current business climate, with high volatility the world over, has investors seeking safe harbor. Look at some of the larger deals that have closed, such as 516 units at Biscayne Bay and 496 units at Elliot’s Crossing and numerous
continued on page 9
More than One in 10 Homeowners Underwater as Housing Market Nears Full Recovery
R
ising home values are freeing homeowners from negative equity, allowing them to re-enter the market, but 11 percent of homeowners remain upside-down. Nationally, the negative equity rate fell to 10.9 percent in the third quarter, down from 13.4 percent a year ago. Western metros have the lowest rates of negative equity. 26.1 percent of homeowners with a mortgage have less than 20 percent equity in their homes, or are in effective negative equity. continued on page 8
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smaller deals,” he said in the release. In November alone, Phoenix had $320 million in multifamily sales with many California investors moving in.
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Rental Housing Journal Arizona
The How and Why of Becoming a Really Likable Property Manager By Marc Courtenay, www.propertymanager.com
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s I listened to this long-time property manager describe his losses I was astounded. “These ungrateful owners don’t deserve me. I’ve worked hard for them and their residents and this is what I get?” Although this man was intelligent, his people-skills and mannerisms were brash, condescending and curt. Nobody enjoys the company or doing business with a person who abruptly talks down to the them. Like many folks, he didn’t seem to realize he was being rude and abrasive. After patiently waiting for him to finish his heartfelt, self-justifying oration, I asked him, “What’s your plan to solve this problem?” Apparently that was what he was hoping I had up my sleeve…some answers and a plan to help him. I thanked him for his confidence and told him I’d get back to him after giving the matter more thought. After reflecting on the property managers I know or have heard about who are well-liked by both their clients and their tenants, I came up with the following action-steps below. • Talk to people who know you well, care about you, and are able to be blunt with you. Ask them to tell
heard them, and pause. In that awkward but powerful pause ask yourself, “Am I in the right frame of mind to respond courteously.” • When pausing before responding, consider asking for a “time out.” It’s often appropriate and thoughtful to say, “I want to think about your concerns carefully and get back to you later.”
you the facts about how you affect them and make them feel. Seek the painful truth. • Have a business conversation, a face-to-face meeting with a client or resident. Ask permission for someone to video you and you only. Tell the other person it’s for your “self-evaluation.” • After seeing the video and recovering from the many surprises, begin a list of ideas for self- improvement. Watch the video as many times as you can until solutions arise in your mind. • Be certain you come across to others as authentic and genuine. We
all want to have relationships based on trust. Who do you know who is a good example of authenticity? Emulate them sincerely and ask for a little coaching as well. • Practice being a focused listener. Instead of focusing on how you’ll reply, zero in on understanding what the speaker is saying and then ask relevant questions. As I often say, “People don’t care how much you know until they know how much you care.” • Choose to respond rather than react. If you’re being confronted with accusations or demands, take a deep breath, let the person know you’ve
• Make being reliable a top priority in all your relationships. Clients, residents, family and friends need to be sure they can count on you. Be punctual, don’t keep people waiting and be a person of your word. The property manager I shared these 8 suggestions with took them to heart. Although he still has a tendency to be condescending and reactive, he’s becoming a more likable person and professional. Instead of losing clients and good residents, he’s attracting more than ever. His personal life is more peaceful and satisfying too. Most of all he’s more “comfortable in his own skin” as he describes it.
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Rental Housing Journal Arizona
How to Find and Choose the Best Mortgage Lender for You By Jenny Johnson. Eleete Real Estate
T
hink about finding a mortgage lender the same way you think about finding a home to buy: There may be thousands of different possibilities and you may have to do some legwork, but in the end there’s going to be one that’s exactly right for you. Most consumers only deal with mortgage lenders a few times in their lives, so the amount of information to digest can feel overwhelming. Here’s a guide to understanding the language and choosing a direction.
Fixed or adjustable? A mortgage loan is either fixed-rate, adjustablerate or a hybrid. Fixed-rate loans are exactly that – the interest rate you pay over the life of the loan remains fixed, and your mortgage payment never changes. Adjustable-rate mortgages typically adjust themselves to the financial landscape on an annual basis and rise or fall accordingly. And hybrid loans are fixed-rate for a number of years before changing to an adjustable rate. How long are you planning to stay in the home? If the answer is under 5 years, an adjustable loan may be right for you, because the payments are typically lower in the first years. If you plan
to make this your forever home, the fixed-rate loan is more predictable and may be the better choice for you.
avoid mortgage insurance altogether. This and a lower interest rate will make your monthly payments lower.
Conventional vs. government-insured? Conventional loans are private loans, and include those you would get from a bank, a credit union, a mortgage lender or an internet lender. Governmentinsured loans are guaranteed by the federal government, which includes Federal Housing Administration (FHA) and Veterans Administration (VA) loans. FHA loans can be attractive because both your credit score and the down payments can be lower; conventional loans can be attractive because with a highenough down payment, you can
Direct lender or mortgage broker? You can deal one-on-one with a single mortgage lender, such as a bank, credit union or a private company; they are called direct lenders because you are working with them face to face. If you are approaching several direct lenders, you must apply to each one individually. Or you can use a mortgage broker, a person who acts as a liaison between you and several possible lenders. In the case of the direct lender, you will have to do more research ahead of time to select the company. In the case of the mortgage broker, he or she does some of
that work for you, getting quotes from a variety of different lenders. Interest rates and loan fees should be approximately the same with both approaches, though you may get a break if you have other accounts with your direct lender. Mortgage brokers charge more because they are acting as an intermediary, but that may be worth it for the comparison work they do. Either way, it is definitely to your benefit to get several quotes. A 2012 Stanford University study that researched FHA loans made in a six-week period showed that buyers who shopped for mortgages of $100,000 or $200,000 principal lost at least $1,000 and as much as $2,600 if they gathered only two quotes rather than four.
Gathering information With so many choices, where does a person start? The same place you start when you are seeking a professional in any business: word of mouth. Do you have friends or relatives who have recently purchased homes? Ask about their lenders and their experiences. Your accountant, financial adviser or
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Rental Housing Journal Arizona
Housing Data Reveals Gaps in Economic Opportunity Along Generational, Racial, and Socio-Economic Lines Zillow Economic Forum will explore disparities revealed by housing data and how it affects people in different groups
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s the U.S. housing market nears full recovery, widening gaps along racial, socio-economic, and generational lines are impacting the growth of the housing market and individual cities, according to a growing body of Zillow® research. For example, though millennials want to own homes, the share of young people living at home with their parents has increased sharply. Black mortgage applicants are denied loans at a much higher rate than applicants of other races. And housing affordability is twice as bad for those making a low income than those making a high income. These gaps in economic opportunity are the focus of Zillow's upcoming economic forum Wednesday, January 11 in Washington, D.C. The half-day event, which is open to journalists, will feature a number of experts discussing data and proposed policy solutions around these three areas of disproportionate economic opportunity.
"Our research on housing has unlocked issues that are closely linked to broader social and economic problems in the U.S. – such as poor access to credit, weak income growth, and social mobility," said Zillow Chief Economist Dr. Svenja Gudell. "This forum brings together some of the greatest minds in economic policy and research to explore the troubling disparities in economic opportunity. We will focus on how different generational, racial, and socio-economic groups are affected, specifically in their access to housing and homeownership. I look forward to a discussion that gets to the heart of the issues that we at Zillow spend so much time thinking about."
Zillow's research shows: • Millennials want to own homes and have views about homeownership that are as conservative as their grandparents'.[i] But the share of millennials (18-34) living at home with their parents has increased sharply over the past decade.[ii]
• Since 2012, the share of younger millennials (18-25) living at home has decreased from 55.5 percent to 54.2 percent, while the share of older millennials – those 26-34 who were scarred by the recession in their first years out of college – has increased from 12.9 percent to 14.5 percent.[iii] • Young people are renting for longer before buying their first home, compared to a generation ago. And although first-time buyers' incomes have not changed significantly, the median price of their first home has increased by about a quarter.[iv] • The homeownership rate for black Americans has remained persistently lower than the national homeownership rate for 100 years. In 2016, 71.9 percent of white Americans owned their home, and 41.3 percent of black Americans did.[v] • Black applicants are denied home loans at a much higher rate than applicants of other races. Although the denial rate for black applicants has fallen in recent years, conventional loan applications from blacks are still denied at more than twice the rate of those submitted by whites.[vi] • Over the last 20 years, home values in the metro areas with the most social mobility have soared, making it difficult for low-income people to afford living in the very places where they could most easily achieve socio-economic growth.[vii] • Housing affordability is worst for those making a low income, even if they are living in the cheapest homes available. Nationwide, the bottom third income earners spend twice as much of their income on mortgage payments than the top third. In some expensive markets, those making incomes in the bottom third would have to spend more than half of that income to afford the monthly payment on the cheapest homes on the market. [viii] • The cheapest homes were most likely to face foreclosure during the housing crisis, forcing those families to rent while their finances were recovering during a decade of the highest rent appreciation in history.[ix]
Zillow's Economic Forum will be held Jan. 11 at the Newseum in Washington D.C. and broadcasted online. For more information about the event and how to register, please visit www. zillow.com/public-engagement/2017-economic-forum. Zillow Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle. Zillow is a registered trademark of Zillow, Inc. [i] Zillow Housing Confidence Index (June 2016) [ii] U.S. Census Bureau: Current Population Survey, March Supplement, 2015, made available by the University of Minnesota, IPUMS-USA [iii] U.S. Census Bureau: Current Population Survey, March Supplement, 2015, made available by the University of Minnesota, IPUMS-USA [iv] http://www.zillow.com/research/ first-time-homebuyer-profile-11188/ [v] Zillow analysis of U.S. Census Bureau Housing Vacancies and Homeownership (CPS/ HVS), 2016, made available by the University of Minnesota, IPUMS-USA [vi] Zillow analysis of 2015 HMDA records and Zillow analysis of U.S. Census Bureau, American Community Survey, 2015, made available by the university of Minnesota, IPUMS-USA [vii] http://www.zillow.com/research/social-mobility-housing-costs-12138/ [viii] http://www.zillow.com/research/affordability-2016q1-12763/ [ix] http://www.zillow.com/research/homeownership-rate-us-housing-12961/ [x] Zillow Group Report on Consumer Housing Trends
• Homeowners are disproportionately white and college-educated. Three-quarters of all homeowners who bought in the past year have a college degree.[x]
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Rental Housing Journal Arizona · January 2017
Rental Housing Journal Arizona
DEAR MAINTENANCE MEN: Water and Wax Removal
By Jerry L’Ecuyer & Frank Alvarez
Dear Maintenance Men: Slab leaks! They are the bane of my existence! Turns out the problem is the hot water recirculation line. I’m trying to decide if I should fix it again or just abandon the line and remove the circulation pump and be done with it. What harm can it do? Do I really need a hot water return line for my residential units?
John
Dear John: Unfortunately, dealing with slab leaks is almost a “rite of passage” for property owners or managers. First, let us demystify what a return line really is. Simply, it is a dedicated hot water line which loops from the water heater to the furthest unit, and back to the cold water heater inlet. Its purpose is to maintain hot water at each tap by assistance from the circulation pump. The circulation pump constantly delivers hot water through the return line or loop. A slab leak is a water line break under the concrete floor of a building. A water pipe under a concrete floor can leak for a long time before it is noticed or it can bubble up through cracks in
the concrete depending on soil conditions. The most reported type of slab leak is on the hot water side of the plumbing and along the return line of the recirculating system. The reason for the return line being the most popular leak point is because the water never stops moving and it wears away and corrodes the pipe. We do not recommend canceling the return line and removing the pump.
This will cause other unintended consequence such as a slow delivery of hot water to many of the units in the building. The lack of a pump will waste water while the residents wait for hot water to come out of the tap which in turn will make the water heater work harder. Not only will this annoy the residents, it will cause the water heating bill to go up. As for repair of the return line, there are a number of solutions. If the return line has chronic leaks, it is best to run a new line outside the slab. The old return is canceled at the pump and the furthest plumbing fixture in the building and the new line installed and routed back to the water heater. Another solution after the pipe is repaired is to limit the incoming water pressure with a pressure regulator and put a timer on the recirculation pump to operate only at peak demand times such as morning and evening. Installing a water softener system will also help keep both the hot water heater and water lines from corroding as quickly.
Dear Maintenance Men: I am installing safety grab bars in all of my showers & bathtubs and I need
some guidance on the installation procedure. What do I need to know to install these bars correctly?
David
Dear David: The use of handrails and safety bars help provide stability and extra support required by the elderly and people with limited mobility. Approved ADA grab bars are available in a wide variety of configurations, colors and finishes. The most common is the stainless steel or chrome finish. The grab-bars must be able to support a dead weight pull of 250 pounds. The preferred method is to bolt directly into the wall studs. This is not always practical, as the stud might not line up where they are needed. Grab-bars can be mounted vertically or at an angle to match wall stud spacing. If finding studs becomes a problem, alternate installation methods are available. If your walls are in good condition, you may use large toggle bolts or if you have access to the backside of the shower or bath walls, insert a backer plate or add a new stud for an anchor point. Safety continued on page 11
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Rental Housing Journal Arizona
Market Overview ...continued from page 1 the electronic equipment and aerospace spaces accelerated while negative trends persisted in the recently hot technical business services subsector. By the same token, continued rapid population growth fueled further powerful gains in the construction and leisure and health care services industries, which together contributed one-half of metro job gains. Seasonally-adjusted data also told a slower growth story. Although 3Q16 gains (11,600 jobs) were the highest year-to-date, recent results were soft: three of the four months ended November were negative, generating a net period loss of –4,700 jobs. RED Research specified a 98.6% adjusted-R2 (S.E.=0.4%) PHX econometric forecasting equation using the rate of change U.S. payroll job growth (+), Baa-rated bond yields(t-2) (+) and home price growth (+) as independent variables. As the near-term outlook for each variable is optimistic the equation suggests that metro job growth should continue at above average rates for the next 18 to 24 months. But the longer-term outlook is less benign: gains are likely slip below the 2.4% 27-year average in 2019 as the U.S. economy’s forward momentum begins to dissipate. Occupancy Rate Summary Occupancy Rate (Reis) 95.5% RED 50 Rank 27th Annual Chg. (Reis) +0.2% RCR YE16 Forecast 95.1% RCR YE17 Forecast 95.1% RCR YE18 Forecast 95.3% RCR YE19 Forecast 94.4% RCR YE20 Forecast 93.7%
3Q16 Absorption and Occupancy Rate Trends Robust renter demand for apartment space continued through the summer irrespective of somewhat weaker job creation. Reis aver that tenants net leased a total of 1,310 vacant units during the third quarter compared to 1,336 and 960 units during the prior
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and year -earlier quarters, respectively. At the same time supply receded to a two-year quarterly low 609 units, producing a 40 basis point occupancy surge to 95.5%, representing the third strongest sequential rate gain recorded among the RED 51 markets. Axiometrics surveys of 802 stabilized, same-store properties found average occupancy of 94.3%, down –10bps year-on-year. Class-B (94.6%) properties posted highest occupancy, unchanged y-o-y. Class-C (93.9%/Unchanged) and class–A (93.4%/-30bps) followed. Including properties in leaseup, class-A was 85.5% occupied. Only one submarket (East Mesa) recorded occupancy above 95%, down from eight in 2Q16. Five submarkets recorded occupancy below 94%, including Northeast (92.0%), Sunnyslope (93.2%) North Tempe (93.8%) and Paradise and Deer Valleys. The Phoenix occupancy outlook is constructive. After digesting a small surge of supply in 2017, RCR’s absorption model foresees a solid recovery in 2018 to the low–95% area. Near equilibrium conditions are likely to prevail through late decade, maintaining occupancy in the neighborhood of 95%. Our supply model suggests that some degree of supply risk may return in the out-years should building trends revert to Phoenix’s rapid historic norm. Effective Rent Summary Mean Rent (Reis) $855 Annual Change 6.7% RED 50 Rent Change Rank 6th RCR YE16 Forecast RCR YE17 Forecast RCR YE18 Forecast RCR YE19 Forecast RCR YE20 Forecast
5.8% 4.0% 4.1% 3.6% 2.6%
3Q16 Effective Rent Trends Rent trends continued on a steep trajectory, according to Reis, as the metro average advanced $11 (1.4%) sequentially and 6.7% year -on-year to $855. Annual metro trends ranked 6th
among the RED 51, down from 5th in 2Q16, Phoenix’s highest ever rank. The class- B&C segment was largely responsible for third quarter strength. While class-A sequential asking rent gains declined to 0.6% from 2.1% and 1.7% in 1Q and 2Q16, respectively, the “B&C” segment posted a robust 1.8% increase, its fastest gain in 10 years. Axiometrics same-store data ran along similar lines. Stabilized property rents increased 7.2% y-o-y, down from 2Q16’s 10-year high 8.1% performance. Class-C (8.4%) posted the fastest growth for the 6th consecutive quarter, followed by classes-B (7.3%) and –A (5.3%). New properties appeared most vulnerable as 7 of 10 assets in lease up with an annual comparison suffered y-o-y declines. Glendale South (11.2%) was the sole submarket to notch a double-digit gain, followed by Sunnyslope (9.9%) and South Scottsdale. Northeast, P.V. and North Scottsdale trailed the pack. RCR’s rent model uses job (+), supply(t-1) (-) and home price growth and occupancy (+) as independent variables to achieve a 96.6% adjusted-R2 (S.E.=0.6%). The model projects rent growth exceeding Phoenix’s 2.9% longterm average rate through 2020, when supply risk returns. Over the 5-year forecast interval, 3.3% compound annual rent growth is expected, ranking 20th fastest among the RED 47 peer group. Trade & Return Summary $5mm+ / 80-unit+ Sales 40 Approximate Proceeds $1,081MM Average Cap Rate (FNM) 5.4% Average Price / Unit Expected Total Return RED 46 ETR Rank Risk-adjusted Index RED 46 RAI Rank
$105,556 6.7% 29th 3.92 23rd
3Q16 Property Markets And Total Returns Following 2Q15’s record 65 transaction/$1.9 billion property market performance sales velocity could only
cool off. It did in fact, but third quarter results still were impressive. Investors acquired 40 $5mm or larger properties for total proceeds of $1,018mm, making the third quarter the fourth and third most active ever with respect to transactions and proceeds, respectively. The average price per unit metric was $105,556, down -4%, attributable to a buyer shift toward older value-add properties. Preliminary 4Q16 data suggest that sales will approach or surpass third quarter outcomes. Cap rate levels were relatively stable overall but some degree of compression was evident in the value-add segment. Class-A trophies trade in the 4.6% to 4.9% range. Class-B+ institutional quality assets command prices equating going-in yields between 4.9% to 5.25%. ClassB/B– value-adds attracted interest at levels only slightly higher, trading from 5.25% to 5.5%. Class-C assets in tertiary submarkets exchanged hands at 6.0% to 7.0% levels. Addressing the growing interest in PHX value-adds RCR elected to trim the cap rate proxy 5 basis points to 5.25%. Using this purchase yield, a 6.0% terminal cap rate and model derived rent and occupancy point estimates, we estimate that an investor would expect to achieve a 6.7% unlevered total return over five years, ranked 29th among the RED 47 peer group. Lower than average demand and supply model standard errors boost risk-adjusted returns: Phoenix’s RAI now ranks 23rd among the peer group.
By Daniel J Hogan Director of Research djhogan@redcapitalgroup.com 614-857-1416 Office 1-800-837-5100 Toll Free
continued on page 10
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Advertise in Rental Housing Journal Arizona Circulated to over 10,000 apartment owners, on-site and maintenance personnel monthly
Call 503-221-1260 for more information • www.rentalhousingjournal.com 6
Rental Housing Journal Arizona · January 2017
Rental Housing Journal Arizona
U.S. Housing Worth Record-High $29.6 Trillion in 2016
T
The national housing market gained $1.6 trillion over the past year, a 5.7 percent increase from 2015
he total value of the U.S. housing stock grew to a record-high $29.6 trillion in 2016, according to a new Zillow® analysis. The housing market saw a strong year of appreciation, growing 5.7 percent in value, or $1.6 trillion. The U.S. housing market has regained all the value lost during the housing crisis. The cumulative value of all homes in the U.S. declined by $6.4 trillion between 2006 and 2012 as the housing market collapsed. A home is typically the biggest part of an individual or family’s wealth, and the cumulative value of the U.S. resi-
dential housing stock is similarly significant to the national economy. The U.S. GDP is an estimated $18.7 trillioni, nearly $10 trillion less than the value of all homes in the country. Los Angeles and New York metros hold the highest shares of the country’s overall housing value, at 8.6 percent and 8 percent, respectively. The next most valuable metro is San Francisco, worth 4.2 percent of the overall housing value. While several markets are now more valuable than they were at the height of the housing bubble, about 60 percent of the markets in the U.S. are still below the maximum values reached during
the bubble years. For example, Chicago is still about $134 billion below the highest value it reached in 2006. “Housing is incredibly important to us personally and to the economy as a whole,” said Zillow Chief Economist Dr. Svenja Gudell. “The U.S. housing stock is worth more than ever, which is a sign of the ongoing housing recovery. As buying a home gets more expensive, affordability remains a concern for many, and these numbers highlight just how much people are spending on housing. The total value of the housing stock grew nearly 6 percent this year, a pace that will likely mean
some American families are priced out of homeownership.” Renters this year paid $478.5 billionii, a $17.7 billion increase from 2015. About 635,000 new renter households formed in 2016, contributing to the amount of rent spent even as rent appreciation slowed. Apartment renters spent nearly $50 billion more than renters of single-family homes, as more multifamily construction became available this year. Renters in the New York/Northern New Jersey metro paid the most this year, spending nearly $55 billion on rent. continued on page 11
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Advertise in Rental Housing Journal Arizona Circulated to over 10,000 apartment owners, on-site and maintenance personnel monthly
Call 503-221-1260
for more information 7
Rental Housing Journal Arizona
One in 10 Homeowners Underwater ...continued from page 1 Even as home values approach the highest levels reached during the housing bubble, 11 percent of homeowners with a mortgage are underwater, according to the third quarter Zillow® Negative Equity Reporti The share of homeowners who owe more on their mortgages than their homes are worth has dropped by nearly two-thirds since the housing bubble burst four years ago. Nationally 5.3 million homeowners were in negative equity in the third quarter, meaning they owe more than their homes are worth. At the peak in Q1 2012, 15.7 million homeowners were underwater on their mortgages. The numbers are another sign that the housing market has nearly regained
the value lost during the recession, and is only 2.7 percent below the peak reached at the height of the bubble. Not all regions have experienced the same recovery, though, and some markets are still well below those bubble highs. Underwater homeowners can't refinance to take advantage of still-low mortgage rates and they can't sell their homes except in short sales, which keeps these homes off the market, contributing to low inventory. Seven of the 10 large metros with the lowest rates of negative equity are along the West Coast, and also have strong economic markets. Fewer than five percent of homeowners are underwater in San Jose, San Francisco, Portland, Ore., Denver, and Dallas. In these metros,
home or at least regain some financial stability, but also for buyers who may find more options now. I expect homes will gain value steadily, for solid economic reasons, and that negative equity rates will continue to fall." Homeowners who have less than 20 percent equity in their homes may find it difficult to cover the associated costs of selling, such as agent fees, closing costs, and a new down payment if they are buying a new home. More than a quarter of homeowners with a mortgage are in this situation, known as effective negative equity.
Metropolitan Area
Percent of Underwater Homeowners
Total Amount of Negative Equity
Number of Homes in Negative Equity
Effective Negative Equity Rate
United States
10.9%
$479 billion
5,269,166
26.1%
New York/Northern New Jersey
10.0%
$40 billion
250,842
21.5%
Los Angeles-Long Beach Anaheim, CA
5.7%
$18.8 billion
90,452
14.0%
Chicago, IL
17.0%
$29.8 billion
277,867
33.5%
Dallas-Fort Worth, TX
4.4%
$5 billion
44,998
12.7%
Philadelphia, PA
11.8%
$10.7 billion
124,492
29.4%
Houston, TX
6.9%
$6.1 billion
59,000
19.4%
Washington, DC
12.4%
$19.9 billion
136,068
30.5%
Miami-Fort Lauderdale, FL
10.6%
$9.8 billion
88,840
21.1%
Atlanta, GA
13.0%
$10.8 billion
127,592
30.3%
Boston, MA
6.2%
$7.9 billion
49,005
14.3%
San Francisco, CA Detroit, MI
3.7% 12.2%
$5.9 billion $5.8 billion
24,224 93,270
8.9% 24.0%
Riverside, CA
10.5%
$8.3 billion
65,609
26.3%
Phoenix, AZ
11.2%
$9.1 billion
79,519
29.6%
Seattle, WA
6.6%
$6.8 billion
41,667
17.2%
Minneapolis-St Paul, MN
7.3%
$5 billion
48,956
22.4%
San Diego, CA
6.3%
$4.9 billion
27,452
18.1%
St. Louis, MO
12.6%
$4.2 billion
66,607
30.8%
Tampa, FL
10.5%
$3.6 billion
48,764
24.9%
Baltimore, MD
14.4%
$7.9 billion
73,895
34.4%
Denver, CO
4.4%
$3.3 billion
22,326
11.9%
Pittsburgh, PA
8.1%
$2.2 billion
33,395
19.8%
Portland, OR
3.8%
$2.1 billion
15,152
11.7%
Charlotte, NC
8.1%
$3.6 billion
34,268
24.2%
Sacramento, CA
7.6%
$3.6 billion
27,123
20.9%
San Antonio, TX
10.2%
$2.9 billion
30,933
28.3%
Orlando, FL
11.4%
$3.3 billion
39,743
27.0%
Cincinnati, OH
10.8%
$3.1 billion
43,385
29.6%
Cleveland, OH
14.6%
$3.3 billion
55,547
31.1%
Kansas City, MO
12.4%
$3 billion
44,646
33.1%
Las Vegas, NV
16.8%
$5 billion
49,809
36.8%
Columbus, OH
9.0%
$2.7 billion
31,314
24.1%
Indianapolis, IN
12.8%
$3 billion
46,772
33.9%
San Jose, CA Austin, TX
2.6% 6.6%
$1.9 billion $2.2 billion
6,905 18,383
6.4% 18.6%
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.
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home values have also surpassed the highest point reached during the bubble, and are now higher than ever. Chicago and Las Vegas have the highest levels of negative equity, with 17 percent and 16.8 percent of homeowners underwater respectively. Home values in these markets remain well below their peak levels. "As the housing market recovers and home values rise, the number of homeowners underwater on their mortgages continues to drop," said Zillow Chief Economist Dr. Svenja Gudell. "In addition to the individual homeowners who are underwater, negative equity affects the housing market as a whole, so this is good news not only for these owners, who are now able to either sell their
The data in the Zillow Negative Equity Report incorporates mortgage data from TransUnion, a global leader in credit and information management, to calculate various statistics. The report includes, but is not limited to, negative equity, loan-to-value ratios, and delinquency rates. To calculate negative equity, the estimated value of a home is matched to all outstanding mortgage debt and lines of credit associated with the home, including home equity lines of credit and home equity loans. All personally identifying information ("PII") is removed from the data by TransUnion before delivery to Zillow. Overall, this report covers more than 870 metros, 2,400 counties, and 23,000 ZIP codes across the nation. i
Rental Housing Journal Arizona · January 2017
Rental Housing Journal Arizona
Choose the Best Mortgage Lender ...continued from page 3
Multifamily Investing Hits Record ...continued from page 1
real estate agent can be another source of referrals. Spend some time on the internet looking through different deals from different lenders, just to familiarize yourself with the playing field. If you contact various lenders, remember that each of them wants to “sell” you their business, so you need to ask questions and compare the answers just as you would in any other large purchase. Take good notes and ask the lenders to email or fax you Good Faith Estimates (GFE) and Truth-In-Lending (TIL) statements. When you have several candidates, interview them just as you would if they were applying for a job – because they are. They will be able to take your financial information and help you understand how much of a mortgage you can qualify for. Be sure you understand the following from each lender or broker:
“A lot of these deals are being fueled, sometimes on the equity or debt or both, by large institutional investors such as life insurance companies, pension funds and REITs needing yield. Phoenix, and to a lesser degree Tucson, with our strong jobs growth and continued population increases have become that safe harbor and I would expect to see more of these deals as the year comes to an end,” Brophy said in the release. “The apartment market is working like it should in Phoenix now,” Tom Simplot, CEO of the Arizona Multihousing Association and a former Phoenix councilman, told the Arizona Republic. He told the newspaper that developers are building, renters are renting and investors are buying.
• What is the best interest rate can I get with your loan products, and when can I lock that rate in? • Am I eligible for any special programs? (Veterans or first-time home-buyers, for instance.) • How much down payment is required to get your best rate?
• Are there prepayment penalties? You don’t want to be caught paying a penalty fee if you send in an extra mortgage payment once or twice a year. • Will I need mortgage insurance, and how much will that add to my payment? This information will give you a great basis on which to choose a lender. And you can check license information for the financial services provider you are considering at NLMS Consumer Access, which will also tell you how long the loan officer has been in business and whether he or she has been the subject of any selfreportedstate disciplinary proceedings. Jenny Johnson is Senior Real Estate Broker at Eleete Real Estate in Portland, Or. She has been a top producer representing buyers and sellers or homes and investment properties for over 14 years. Jenny.johnson@eleetere.com | 503267-3412 | www.eleetere.com Free download: The Definitive Guide To Real Estate In Portland, OR by Jenny Johnson https://rentalhousingjournal.leadpages.co/the-definitive-guide/
• What will my monthly payments be with those terms? • What fees will I have to pay? (These are commonly called “points,” which you pay at closing. For every “point” that you pay, the lender will decrease your interest rate by 1 percent.)
Phoenix multifamily passes 2007 peak pricing Whereas many markets across the U.S. have already exceeded peak sales price per unit amounts, Phoenix multifamily, despite a frenetic sales pace, just crested our 2007 average sales price per unit peak by an average across all year built types by 6%, Brophy said in the release. • The 1980s- built product has seen the greatest increase rising, on average, 14% above peak 2007 pricing, currently $77,514 unit. • The 2000-09- built projects are second, in terms of peak-to-peak appreciation, and have risen 9.5% above 2007’s $118,370/unit average sales price • In fact, out of all the time periods assessed only 1990s-built product is below its 2007 peak, $128,574, resting currently at $123,271, which is 4% below peak.
30 percent of Phoenix multifamily housing stock built in the 1980s “It stands to reason that 1980’s built apartments have seen the greater share of the appreciation trend. First, and this is particularly true in the Phoenix multifamily in the Metro, nearly 30% of our entire apartment housing stock (10+ unit properties) was built in the 1980’s. “Much of this housing, and their surrounding environs, have witnessed tremendous demographic and economic changes since their construction. Furthermore, multifamily owners/investors not wanting to trudge the expensive and time consuming road of new development have opted for rehab and
Rental Housing Journal Arizona · January 2017
re-tenant strategies as a way to optimize value, often called the value add play,” Brophy said in the release. Although both 1980s and early 2000s product have witnessed consistent yearover-year rental rate and occupancy appreciation, 1980s product is still, on average, $230 below newer built product. From 2011 to YTD, 1980s product has witnessed average monthly rental rate appreciation of 5.2% per year with an almost 4% jump in occupancy. Conversely over the same time period, early 2000s built product has seen average monthly rents increase 4% per year and a 2% increase in occupancy.
How long will this continue? “As shown in our Phoenix Metro per City Analysis: Rents, Occupancy, Population & Affordability post, despite sustained average per year rental rate increases of approximately 4%, elevated construction amounts (although nowhere near peak building), the Phoenix Metro is at historical highs both in terms of occupancy, trending towards 97%, and renter retention, which at nearly 55% is some 3% higher than the national average. “Interest rates currently spiking, especially from their July pre-election lows, have dampened buyer’s ability to afford the purchase of homes. While this spike has impacted the lone, individual home owner, interest rates do not operate in a vacuum and do impact all people and investors equally when it comes to purchase power. Nonetheless, with average Cap rates for the Metro still in the 5 percent to 7 percent range, contingent upon product type/location, investors still have the ability to withstand marginal increases in rates most likely coming in the next six months to a year,” Brophy said in the release. Resources: Arizona multifamily transactions top $3 billion ht t p: //re nta l h o usi ng j o u rn a l.co m /a r ti cles/2016/11/07/arizona-multifamily-transactions-top-3-billion Phoenix area in the midst of apartment building boom http://www.azcentral.com/story/money/ real-estate/catherine-reagor/2016/12/11/ phoenix-area-midst-apartment-buildingboom-how-long-last-catherine-reagor-realestate/95146002/ Phoenix metro multifamily market tops $4.5 billion in sales http://abimultifamily.com/phoenix-metromultifamily-market-tops-4-5-billion-in-sales/
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Rental Housing Journal Arizona
Market Overview ...continued from page 6
The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED Capital Group. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.
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Rental Housing Journal Arizona ¡ January 2017
Rental Housing Journal Arizona
U.S. Housing Worth ...continued from page 7 Metropolitan Area United States New York/Northern New Jersey Los Angeles-Long Beach-Anaheim, CA Chicago, IL Dallas-Fort Worth, TX Philadelphia, PA Houston, TX Washington, DC Miami-Fort Lauderdale, FL Atlanta, GA Boston, MA San Francisco, CA Detroit, MI Riverside, CA Phoenix, AZ Seattle, WA Minneapolis-St Paul, MN San Diego, CA St. Louis, MO Tampa, FL Baltimore, MD Denver, CO Pittsburgh, PA Portland, OR Charlotte, NC Sacramento, CA San Antonio, TX Orlando, FL Cincinnati, OH Cleveland, OH Kansas City, MO Las Vegas, NV Columbus, OH Indianapolis, IN San Jose, CA Austin, TX
Total Home Value, Year-End 2016 $29.6 trillion $2.4 trillion $2.5 trillion $772.7 billion $456.9 billion $589.2 billion $373.2 billion $975.1 billion $818.8 billion $413.6 billion $672.7 billion $1.3 trillion $288.7 billion $440 billion $441.5 billion $571.4 billion $332.5 billion $596 billion $192 billion $254.7 billion $287.9 billion $377.5 billion $148 billion $286.6 billion $186.1 billion $269.4 billion $116.4 billion $187.5 billion $128.6 billion $116.8 billion $129.7 billion $175.9 billion $132.9 billion $111.7 billion $636.2 billion $161.4 billion
Maintenance Men ...continued from page 5 Total Rent Paid, Year-End 2016 $478.5 billion $54.6 billion $38.6 billion $14.9 billion $11.1 billion $8.5 billion $10.5 billion $14.4 billion $12.3 billion $8.4 billion $10.3 billion $15.8 billion $4.9 billion $7.2 billion $7.1 billion $8.8 billion $5.1 billion $9.6 billion $3 billion $5 billion $4.3 billion $5.8 billion $2.3 billion $4.5 billion $3.2 billion $4.4 billion $3 billion $3.8 billion $2.4 billion $2.3 billion $2.7 billion $4 billion $2.7 billion $2.4 billion $6.3 billion N/A
Zillow
Zillow is a registered trademark of Zillow, Inc.
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.
i https://www.bea.gov/newsreleases/national/ gdp/2016/pdf/gdp3q16_3rd.pdf ii To calculate the total rent paid, we estimated the number of renter households in each metro area based on the U.S. Census Bureau’s 2005 through 2015 American Community Surveys (ACS), and households counts and metro-level homeownership rates from the Current Population Survey/Housing Vacancy Survey (CPS/ HVS). ACS microdata files were downloaded from the University of Minnesota, IPUMS-USA. We then summed the monthly Zillow Rental Indexes (ZRI) for each year, including a forecast for November and December 2016 ZRI. (Actual November December 2016 data were unavailable at the time of the analysis). Finally, we took the product of the estimated number of renter households and the summed ZRIs for each metro, and scaled the results by a rental stock adjustment factor, which controls for differences in the footprint of the rental stock and the total housing stock. The rental stock adjustment factor was derived from the historical and recent relationship between ZRI and monthly contract rents reported in the 2015 ACS for each geography. Either the most recent year’s adjustment factor or the historical average adjustment factor was applied to 2016 data depending on the model cross sectional performance.
grab bars can be located at any local hardware store. It is advisable that you check ADA requirements with local, state and federal agencies for regulations governing height, distance & angle of the bars.
Dear Maintenance Men: I was cleaning the kitchen stove in one of my vacant units and noticed the free standing stove tipped forward when I put a bit of weight on the open oven door. It looked a bit dangerous and was wondering how I can fix this issue.
Rick
The solution is an “anti-tip bracket” installed behind the stove. An anti-tip bracket is “L” shaped and usually installed on the floor and against the wall (towards the back of the stove) for one of the rear legs to slide into. Replacement parts are available at any hardware or home center stores, however, if not installed, there is a good chance, it is still in the plastic bag tied to the back of the stove. Shut off the circuit breaker or gas line feeding the stove, carefully slide the stove away from the wall, ensure a bracket isn’t installed (the last time the stove was slid against the wall it may have simply missed the bracket) and if not installed, search around for the original plastic bag. Hopefully, the instructions and template is still in the bag. Keep in mind installing an anti-tipping bracket is both a resident safety issues as well as an owner liability issue. This is a $10.00 part and a ten minute install that will keep both you and your resident out of hot water. Bio:
Dear Rick: You are very lucky it was you and not one of your resident’s children that found out about the dangers of a tipping oven. First let us explain what a tipping oven is: Most stoves with an oven are free standing appliances. The stove is placed in the kitchen, gas or electrical lines are installed and it is ready for use, very simple. The issue arises when a resident is using the stove and they or a child opens the oven door and puts weight on the open door. This causes a cantilever effect which may pitch the whole stove forward causing the stove top pots or pans to fly off the stove and onto the person or child in front of the stove. Best case scenario is this causes a mess in the kitchen and worse case is a resident or child is badly burned or disfigured. It is not uncommon to hear about a small child wanting to see what Mommy is cooking by using the oven door as a stepping stool or even more common, removing a turkey, roast or other large item from the oven and placing it on the open door. The extra weight is enough to tip the stove forward.
If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988. Frank Alvarez is the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com
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Rental Housing Journal Arizona ¡ January 2017