Texas Economic Indicators

The Texas economy strengthened in October. The state posted strong job gains, and the unemployment rate fell to a record low. Firms responding to the Dallas Fed’s Texas Business Outlook Surveys reported accelerating growth in production, revenue and sales as well as continued optimism in the outlooks.

Labor Market

Texas employment expanded an annualized 6.4 percent in October, outpacing the nation’s 2.2 percent growth (Chart 1). Year to date, Texas employment has grown at a 2.7 percent annual rate. The Dallas Fed’s Texas Employment Forecast suggests 2.6 percent job growth in 2017 (December/December). The Texas unemployment rate dipped to 3.9 percent—its lowest point in the history of the series, which dates back to 1976. Unemployment also ticked down in all of Texas’ major metros and in the U.S. in October.

Payroll expansion was broad based across the major metros in October, with Houston employment surging 9.5 percent following a 7.2 percent decline in September. Employment has expanded in all Texas major metros year to date, with San Antonio leading at 3.0 percent.

Service sector employment has grown 2.4 percent this year through October, and goods sector employment is up 4.3 percent. Employment has expanded in all major sectors this year except information services, where it has declined 2.4 percent. Payrolls in oil and gas have increased the most at an annualized 13.1 percent year to date.

Texas Business-Cycle Index

The Dallas Fed’s Texas Business-Cycle Index reflects continued expansion in the state’s economy (Chart 2). The index rose an annualized 5.8 percent in October, well above its long-run average of 3.9 percent. Growth in the index has accelerated each month since mid-2016.

Texas Business Outlook Survey Indexes

The three-month moving averages of the Dallas Fed’s Texas Business Outlook Surveys indicated accelerating growth in factory production, service sector revenue and retail sales in October. The three-month moving average of the manufacturing production index rose to its highest level in over 10 years, and the moving averages for the headline indexes in all three surveys were above their long-term trends.

Outlooks continued to reflect optimism across sectors (Chart 3). The three-month moving average of the company outlook index for manufacturing reached a postrecession high in September and held steady in October, while the three-month moving average of the service sector and retail company outlook indexes ticked up in October and remained elevated compared with their long-run averages.

Energy Sector

West Texas Intermediate crude oil dropped the week of Nov. 17 to $55.89 per barrel but remained 8.0 percent above levels seen four weeks earlier (Chart 4). Natural gas was $3.08 per million Btu, 8.9 percent above levels four weeks earlier. The weekly rig count is at 449 after reaching a post-oil-bust peak in August of 466 rigs.

Exports

Texas exports rose 4.2 percent in September, while U.S. exports edged down 0.3 percent. Year to date, Texas exports are 8.3 percent higher and U.S. exports are up 3.6 percent compared with the same period in 2016.

Even so, Texas exports declined 1.9 percent in the third quarter (Chart 5). Exports to Mexico—Texas’ largest trading partner—ticked up 0.9 percent, and exports to China rose 14.2 percent. Exports to other world regions dropped during the quarter.

Exports of computers and electronics—Texas’ largest export sector—fell 10.8 percent in the third quarter. Exports of petroleum and coal—the state’s second-largest export sector—declined 2.8 percent.

Housing Market

The Texas real median home price was $225,085 in September—3.9 percent above year-ago levels and 0.3 percent above August levels (Chart 6). Home prices in Austin and Houston ticked up in the month, while they edged down in Dallas, Fort Worth and San Antonio. Fort Worth’s median home price in September posted the fastest year-over-year increase among the major metros at 7.4 percent, followed by Dallas at 5.5 percent.

Texas existing-home sales rose 9.5 percent in September, and the five-month moving average held steady. Home sales in Texas are 4.1 percent higher in the first nine months of the year compared with the same period in 2016. Year-to-date sales are ahead of the same period last year in all the major Texas metros, with Houston posting the slowest growth at 2.6 percent.

Read the original article here.

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3Q17 ARA NEWMARK UNITED STATES MULTIHOUSING MARKET OVERVIEW

ARA Newmark and Berkeley Point Capital present the Third Quarter 2017 United States Multihousing Market Overview. The statistics and outlook contained in the report illustrate current trends in the Multihousing sector.

Executive Overview

Sales Volume Sales volume for the past 12 months totaled $148.5 billion with quarterly volume reaching $39.3 billion, representing an 11.1% quarter-over-quarter increase and 4.0% year-over-year growth. Investors continue to pour capital into top-tier secondary markets such as Atlanta, Dallas and Denver.
Cap Rates Cap rates remain flat year-over-year at 5.0% for institutional-quality assets. The third quarter represents the tightest spread between major markets and secondary markets as yield-driven capital continues to flow into secondary and tertiary markets.
Rent Growth Nationwide rent growth remains flat at 2.3% while still positive. Western metros such as Phoenix, Sacramento, San Diego and Seattle continue to lead the nation in rent growth as they benefit from strong demographic and economic tailwinds.
Supply and Demand New supply is anticipated to peak in 2017 with over 389,000 units delivered throughout the United States. This cycle has been heavily weighted toward urban infill and luxury product compared with the previous cycle which was dominated by Class B suburban assets.
International Capital International capital sales volume rose to $11.3 billion over the past 12 months. High net worth and sovereign wealth funds are increasingly growing their multihousing portfolios through indirect investment vehicles and joint ventures with domestic sponsors.
Debt Markets Debt outstanding increased $21.7 billion to $1.2 trillion with Agency & GSE lending accelerating 2.5% quarter-over-quarter compared to the broader market of 1.8%. Debt capital remains plentiful for well-positioned assets despite a slowdown in the CMBS market.

For the full report, please click here.

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Forget Machu Picchu: Seven Newly Accessible Wonders of the World

Maybe with your passive income in the bank, you’ll be tempted to visit one if these…

If visiting the world’s most ancient temples and monuments—Angkor Wat, Machu Picchu, Chichen Itza, Petra—inspires your inner Indiana Jones, just imagine what it would be like to explore world wonders few people have ever even heard of yet.

Some of the world’s most staggering historical sites—places that have long existed as local secrets—have recently been made accessible thanks to a slew of intrepid tour operators, hoteliers, or infrastructure developments. In the coming years, these places will find their way onto hordes of global travelers’ bucket lists, but for now they are still relatively under the radar.

There are the dramatic, thousand-year-old temple complexes in India that are immaculately preserved but were hard to visit in style—until the area’s first luxury hotel opened. There is a jungle-shrouded archaeological site in Colombia that predates Machu Picchu by 650 years, and a spectacular sacred city in Sri Lanka that’s until now been off limits because of underdeveloped infrastructure and political turmoil. And that’s only a drop in the bucket.

“A willingness to move a little off the beaten path often provides great rewards,” said Lisa Ackerman, executive vice president of World Monuments Fund, who says that the joy of discovery and lack of crowds makes these underexplored sites especially exciting for visitors.

But the benefits of visiting these places go far beyond that. Spreading visitation among more sites, she says, is an important key to tourism management everywhere—as proven by the fact that overvisitation to Machu Picchu continually threatens to shut the site down for tourists for good. (It’s not just Peru, either; the overtourism phenomenon is playing out across the globe.) And by creating a viable tourism economy around newly discovered sites, travelers motivate locals to take pride in their heritage and invest in its preservation.

With that in mind, we’ve assembled a list of the newly accessible wonders of the world, along with the practical information you need to get there first.

The Remains of a Royal Empire in India

A stepped pond in the Vijayanagara temple complex in Hampi, India.Photographer: IndiaPictures/Universal Images Group Editorial

It wasn’t long ago that visiting the 14th-century ruins of the Vijayanagar Empire in Hampi, India, meant taking an overnight train from Bangalore and sleeping in a three-star inn. (The lost city is situated in central Karnataka, placing it almost midway between that southern Indian tech hub and the beach town of Goa.) But in the past two years, a handful of independently owned, small-scale resorts have opened, crowned by the recent arrival of Kamlapura Palace. The five-star hotel is the area’s first, with 46 rooms that offer a modern-day reimagining of the area’s historic remains; local expert Victoria Dyer, of India Beat, calls it a game-changer for her high-end travelers. Getting there is easier, too, with plenty of infrastructure investment going for road improvements throughout the state.

As for the monuments themselves, expect 265 square kilometers of terrain to explore, speckled with mysterious-looking boulders. The Hindu temple of Virupaksha, dedicated to Shiva, is said to be one of the oldest structures in the empire (and possible in the country), dating to the 7th century, while exquisitely preserved sites such as the Sule Bazaar, the Queen’s Bath, and the elephant stables offer a remarkable glimpse into old Indian life.

The Onetime Mayan Capital in Guatemala

Ashish Sanghrajka, president of Big Five Tours & Expeditions, says that El Mirador is five times the size of Tikal, the ruins that bring hundreds of thousands of visitors to Guatemala each year. But given that they’re still being unearthed by a team of archaeologists, it’s hard to know exactly how large and how important they really are. For now, the answer to both is “very”—the head scientist on site has said that unearthing it has been like “finding Pompeii.” After all, this is believed to be a onetime capital of the Mayas, and it is one of the backdrops for Morgan Freeman’s TV series, The Story of God.

So why has nobody else caught on? For one thing, getting there has typically required a dangerous, five-day trek—but Sanghrajka is sidestepping that by taking his first travelers to the region by helicopter. The chopper lands in a tiny village nearby, where guests can engage with locals who have rarely encountered foreigners; then they saddle up atop donkeys for a three-hour trip through a still-active dig site. (Sanghrajka says the archaeologists are even open to some hands-on help, since visitation is so rare.) “It’ll probably be another 10 years before they have the place fully cleaned up,” he said. “But seeing a place like this totally untouched is something incredible.”

Sprawling Roman Mansions in Portugal

The house of Fountains in Conimbriga, two hours north of Lisbon.Photographer: Jose Elias / Lusoimages/Moment RM

They were created in the 2nd century BCE, renovated under the reign of Emperor Augustus, and then buried under hundreds of years of debris—but now, 100 years after their rediscovery, the Roman ruins of Conímbriga are ready for the 21st century spotlight. With tourism to Portugal hitting an all-time high, overlooked sites such as Conímbriga are gaining awareness—along with nicer places to stay nearby. Virginia Irurita, founder and co-owner of Made for Spain & Portugal, books her guests into Hotel Quinta das Lágrimas, a recently renovated member of Small Luxury Hotels of the World in the neighboring town of Coimbra. “Not only is it a beautiful city,” she said, “it’s also the homeland of fado singing [a melancholic, local style of music], which is a must-see in Portugal.” She’ll also arrange personal guides to bring the lavish Roman mansions back to life again—showing off everything from thermal baths to colorful mosaic décor and gardens with hundreds of historic, hydraulic-powered water jets. (Yes, really.)

Pyramids on Steroids in Sudan

The pyramids of Meroe, in Sudan.Photographer: Albee Yeend

Sudan has twice as many pyramids as Egypt—and yet many people couldn’t point to the vast nation on a world map. (It’s just a short ride down the Nile from Luxor and Aswan.) Tourism infrastructure here is still in its infancy because of a prolonged civil conflict that led South Sudan to split off in 2011, but it’s become an object of fascination practically overnight for luxury outfits such as the Explorations Company. Owner and director Nicola Shepherd is now coordinating privately guided, six-day trips that include visits to the pyramids of Meroe along with the temple ruins at Soleb, an Egyptian monument to the god Amon that’s decked out in hieroglyphics. Overnights are at high-end tented camps and polished local guesthouses. A bonus, Shepherd says, is an easy airlift to Nairobi for combo trips that tack on a beautiful Kenyan safari. But the real draw is having world-class desert ruins all to yourself, with barely even a security guard in sight.

An Ancient Capital in Morocco

The ruins of Volubilis in Morocco. Photographer: Mark Borton

Volubilis, the capital of the Mauritanian empire, couldn’t have been built in a prettier place—in the Moroccan mountains near Meknes. Yet it’s on hardly any itineraries. Now that’s starting to change, as such operators as Intrepid Travel are adding it to more tried-and-true stops such as Marrakesh and Chefchaouen. Even in a country that’s steadfastly held onto tradition, Volubilis feels like a true time machine. Its impressively ornamented ruins, which date to the 3rd century BCE, bore 10 centuries of occupation, with Romans, Christians, Muslims, and Berbers all leaving their mark.

The Lost City of Colombia

An overhead view of Ciudad Perdida, high in the Sierra Nevada of Colombia. Photographer: Thierry Monasse/Corbis

This 1,000-year-old ruin in the Colombian Sierra Nevada is 650 years older than Machu Picchu and has perhaps even more mysterious appeal. Built by the Tayrona people atop a mountain pass that’s dotted with palm trees, it was believed to have claimed as many as 10,000 residents in its heyday—but the surrounding jungle swallowed it up until the early 1970s, after a group of bird hunters turned tomb-raiders dug into the earth and found heaps of golden artifacts. At least that’s how the locals tell the story. Adventurous hikers can traverse a five-day equivalent to the Inca Trail to arrive as the dramatic terraces of La Ciudad Perdida (literally, the Lost City). But now, luxury Colombia tour outfit Galavanta choppers guests in and out from their namesake lodge in the nearby mountains. They’ll also arrange cultural exchange experiences with the indigenous Kogui communities, which are said to have descended from the monuments’ creators.

A Lion-Shaped Fortress in Sri Lanka

The Famous Sigiriya Lion’s Rock fortress. Photographer: Sylvain Bouzat/Moment RF

When King Kassapa ruled over Ceylon in the late 400s, he decided to place his capital atop a 600-foot-high granite boulder smack in the center of modern-day Sri Lanka—a country that’s slowly been reborn to tourists after a prolonged civil war ended in 2009. The whole thing doubled as a massive piece of sculpture: Not only did workers carve stone staircases leading all the way to the top; they also added brick and plaster work to create the illusion of a gigantic lion emerging from the forest. The first two flights of stairs are straddled by enormous, clawed paws; another flight emerges from the lion’s mouth. At the summit, visitors can explore what’s left of Kassapa’s palace, gardens, fountains, and ponds—but the climb is half the fun. Then you can retreat to your own sumptuous digs, at the soon-to-open Pekoe House, in nearby Kandy.

Read the original article here.

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5 Trends in Multifamily Investing for 2018

As 2017 ends, it’s time to predict upcoming trends in the multifamily rental market. If you’re a multifamily investor, there will be a few surprises and some changes you should be prepared for. Here are five areas to follow.

BUILDING RENOVATIONS STAY THE COURSE

There’s a considerable amount of new construction in cities where there is demonstrated and structural job growth, including Portland, Seattle, Los Angeles and Denver. Traditionally, developers have been able to pencil in growth and get a good return for the risk of that development. New multifamily units being constructed in urban areas, urban cores or high-growth and high-job areas have caused a softening in the Class A market for the first time in years. In the new-built market, we’re finally seeing a plateau where supply is meeting demand. Do we need more Class B properties built in suburban locations to meet demand? Absolutely. Are they going to get built? Probably not. The risk/return for developers just doesn’t pencil. The upside to a softening market? Older existing Class B multifamily units built in the ‘70s, ‘80s and even ‘90s, which have been renovated will be in higher demand.

DON’T BYPASS THE SUBURBS

As the population is forced out of the urban core, the suburbs are becoming more attractive. This represents a golden opportunity for investors to look beyond the hot cities and search Class B properties in the outer ring of cities as well. If the suburbs want to grow and be vibrant, they need to create a sense of neighborhood that includes amenities. And that has, for many communities across the country, never been a part of their planning. People want a neighborhood. They want livability. They want walkability. They want an environment that draws people together. Purchasing a building is an investment into the community. Buying distressed buildings, under-performing buildings or under-managed buildings gives an investor the opportunity to enhance those neighborhoods.

DEMOGRAPHICS

The biggest multifamily rental pools will continue to be Millennials and Baby Boomers, and to some extent Generation X. The Baby Boomer market will keep growing as there are more than 70 million Baby Boomers across the country. As this group ages and sells their homes, they’ll want to downsize to amenity-rich multifamily properties. The Millennial rental population will also continue to grow. Like Baby Boomers, Millennials want less space but more community, including the ability to walk or bike to work and have close access to shopping and dining. Many properties in close-in suburbs will fill this need.

EVER-CHANGING INTEREST RATES

Cap Rates have stabilized at a low plateau, but will likely inch up as interest rates climb. This makes it challenging to purchase a property and reach a return hurdle. Yes, the debt will remain available, but with uncertainty surrounding interest rates, it makes underwriting more challenging. Agency lenders like Freddie Mac and Fannie Mae, both a huge part of recent multifamily market growth, have always been solid debt vehicles for multifamily investors and will continue on that path.

HOT MARKETS FOR 2018

Transactional volume is down year-over-year in most markets across the country. The issue isn’t finding a multifamily property, but finding one that makes financial sense. Plus, many investors are looking for the same thing. Case in point: Portland, Ore. Many investors want to buy in Portland but can’t find a deal that makes sense. Just a few years ago Portland was considered a secondary market. Now it’s a top-tier market. Why? There’s job growth, in-migration, vibrancy and public investment in infrastructure. Cities like Portland, Denver, Charlotte and Seattle all have that trait in common and ones that investors will continue to seek out.

PARTING ADVICE

We’ll see some pullback in the industry in 2018, compounded by a slowing of rent escalations in the market. That’s normal and nothing to be alarmed about. Buy right, underwrite correctly and hopefully you’ll make your money on the buy. If you get too exuberant in your underwriting, you’re going to have a difficult time getting your return on sale. Overall, it’s going to be another successful year.

Read the original article here.

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Harvey’s Impact on Houston Apartment Market

A month or so after Hurricane Harvey, Houston’s apartment occupancy and rents are trending upward once more. However, pricing is not spiking, partly reflecting that the metro’s major owners and operators of apartment product recognize the importance of assisting displaced households as the rebuilding process begins.

Metro Houston’s overall occupancy rate in the September performance survey comes in at 93.0%, up 82 basis points (bps) from the August result of 92.2%. These findings suggest the operable apartment stock is as much as 98% to 99% full, as RealPage’s count of apartments temporarily offline points to a figure that could reach up to 43,000 units.

Among properties in initial lease-up, average monthly leasing per property surged to 25 units in September, the strongest performance posted by projects moving through initial leasing since mid-2015. Furthermore, the total number of just over 2,500 units leased in properties still building their initial resident bases in September is the biggest total monthly figure achieved throughout this economic cycle.

September’s effective rents for new leases jumped 1.5% over August pricing. The increase pushed Houston’s annual rent change, which had been running in negative territory, to just over the breakeven point. September 2017 rents top September 2016 rates by 0.2%.

Quite a few of Houston’s largest apartment operators report to RealPage that they froze their rents at pre-Hurricane Harvey levels for most of the month of September, or they placed caps on movement to hold increases to just a few dollars. Shifting into October, they tend to be returning to standard pricing practices, so a better indication of how quickly rents are likely to rise could come over the next few weeks.

Operators, further, are reporting to RealPage that they are paying close attention to lease term as households displaced by the flooding move into new accommodations. While operators want to provide the best solutions for individual households, they also must be careful not to schedule too many additional leases expiring in a short time frame.

Houston’s biggest turnaround in apartment market performance registers in the Class A product sector. That’s not surprising, as Class A results previously were held back by the big blocks of new supply that have been coming to market. Annual rent change for top-tier product moved to 0.7% as of September, compared to levels of -1.5% in August and -7.2% September 2016. Class A community occupancy jumped to 94.7% in September, up from 93.1% in August and 92.7% in September 2016.

Class B projects register September rents that match year-earlier results, a big improvement from 2.1% annual rent cuts recorded a month prior. Occupancy is up to 93.4%, versus the 92.7% reading from August.

Class C properties do not show any momentum in pricing power or occupancy.

Obviously, numerous questions about Houston’s apartment market outlook remain. For example, how much short-term damage has the local economy incurred, and will rebuilding lead to the surge in job growth anticipated over the next few months? Where will the expected influx of construction workers come from, and where will those workers be housed? How quickly can properties now under construction make it across the finish line? Does the damage done by Hurricane Harvey change the way Houston is perceived by capital providers, translating to some hesitancy to bankroll the next round of new supply? Will recent experiences lead to more development regulation for future building?

Market performance information highlighted here was collected in the last half of September, giving owners and operators time to assess the extent of damage to their communities and to move toward somewhat more normalized operations. Some operators reported that the number of units now offline exceeded initial estimates, as further inspection revealed additional apartments needing repairs. Product availability actually increased slightly late in the month, as vacant units that had been reserved for the owner/operators’ employees or for bulk corporate leases were not fully needed in some cases, resulting in those units being put back into the block of product offered to the general populace.

A month or so after Hurricane Harvey, Houston’s apartment occupancy and rents are trending upward once more. However, pricing is not spiking, partly reflecting that the metro’s major owners and operators of apartment product recognize the importance of assisting displaced households as the rebuilding process begins.

Metro Houston’s overall occupancy rate in the September performance survey comes in at 93.0%, up 82 basis points (bps) from the August result of 92.2%. These findings suggest the operable apartment stock is as much as 98% to 99% full, as RealPage’s count of apartments temporarily offline points to a figure that could reach up to 43,000 units.

The rent-growth decline was nowhere near steep enough to affect this year’s overall trend of steadiness. The rate has remained in a 41-bps range since November 2016.

Occupancy also is remaining steady at or very close to the 95.0% mark. September’s occupancy rate of 94.9% was only 6 bps lower than August’s 95.0% and 20 bps below the 95.1% of September 2016.

YTD Rent Growth Can Help Set Expectations

Viewing year-to date (YTD) rent growth at the national level over the past few years reveals some interesting trends. The following graph shows year-to-date rent growth for each month over the past eight years (2017 included).

The most immediate trend this graph shows is the build-up of rent growth throughout the year. In essence, this graph shows us the seasonality of rent growth and confirms that the spring and summer months are generally the strongest for rent growth.

Where readers may find this graph most useful in the near term, however, is in setting expectations into next year. While almost all years represented in the graph show downward movement between the August/September peak and the final December point, that movement is larger in some years than others.

Let’s quickly take a look at some data in tabular form. The following table includes four key metrics. Those include:

The peak rent growth for each of the past eight years, including 2017.
The corresponding month for peak rent growth.
December’s year-to-date rent growth in each of those years.
The peak rent growth level minus December’s YTD rate in each year

Year Peak Rate Month of Peak Dec. Rate Peak minus Dec.
2010 5.1% September 4.5% -0.6%
2011 5.2% September 4.0% -1.1%
2012 4.7% September 3.7% -1.0%
2013 4.2% August 2.8% -1.4%
2014 5.5% August 4.9% -0.5%
2015 5.7% September 4.4% -1.3%
2016 4.3% August 2.6% -1.8%
2017 4.1% July ?? ??
Cycle Avg. (’10 – ’16) 4.9% September 3.8% -1.0%

Extrapolating the trend from recent years, we can expect 2017 rent growth to have peaked in July, the earliest this cycle.

Notice that 2016’s December rate was a mere 2.6%, only rivaled in lethargy by 2013. This sluggish momentum in the second half of the year means 2017 is already fighting an uphill battle in terms of rent growth.

Those curious to see a less-cluttered visual comparing recent performance to performance this cycle can consult the following graph, which averages year-to-date rent growth for each month within the past eight years.

Year-to-date performance as of September was 104 basis points (bps) below the September cycle average of 4.7%.

What does this all mean in terms of national performance?

Although it is fair to think rent growth may be slower coming out of the gate in the early part of 2018 than it has in most other years this cycle, it does not mean 2018 should be immediately written off.

Axiometrics, a RealPage company, forecasts an average of 3.4% annual effective rent growth for 2018, as the market absorbs the extensive supply delivered in 2017 and the early part of 2018. But as long as job growth holds up to the level Axiometrics economists believe, demand in 2018 will help drive solid rent growth – especially in the back half of the year.

As a parting thought, it is important to remember that individual market performance oftentimes differs from the 30,000-foot view of national performance.

Below is a selection of markets in which 2017 YTD performance exceeds or is just slightly below their respective cycle averages.

 

After a sluggish start early in the cycle, Las Vegas has strung together a few years of very solild performance which has continued into 2017.

San Diego has been remarkably consistent in recent years, and 2017 is likely to end the year above the national average yet again. Relatively low new supply and stable job growth are the two primary reasons the southern California city continues to consistently chug along.

Las Vegas and San Diego are exceptions to the general trend. The vast majority of markets are more likely look similar to Washington, D.C. which is running roughly 130 bps below its cycle average

A handful of markets have not fared quite as well in 2017, although some of these are markets that may be expected to rebound in the short-term. For instance, a market such as Austin has struggled in recent years – a trend that’s continued into 2017. However, it appears supply in 2018 (based on Axiometrics-identified supply) is going to be lower than it was in 2017 which may set the stage for a potential rebound in the market.

Finally, some markets defy this conventional logic that rent growth slows down in the latter half of the year, such as Miami. The boost as a result of reverse seasonality of which Miami (and most South Florida markets) serves as a prime example.

Look Who’s Back in the Top 15

The top 3 of Sacramento, Las Vegas and Long Island stayed in place on the list of metros with the highest effective rent growth. But look farher down the chart, and you’ll see an old friend reappearing.

San Jose, formerly a top 5 stalwart that sustained a six-month run of negative effective rent growth from August 2016-January 2017, re-entered the list at No. 15 in September. The South Bay’s 3.2% rent growth marked a 135-bps increase from August’s 1.9% and a 664-bps leap from September 2016’s -3.4%, the low point of the market’s valley.

Elsewhere in the Bay Area, San Francisco bounced back into positive territory with a 143-bps rise from -0.3% in August to 1.1% in September, though the metro is still below the national rate. Oakland, meanwhile, remained steady at 1.6%.

Richmond and Jacksonville also made big leaps, moving into fourth and fifth position, respectively, from Nos. 8 and 10 in August. Indianpolis entered the list at No. 13, while Anaheim dropped off.

Read the original article here.

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Are Renter Roommates Doubling Up or Un-Doubling?

Approximately 43.7 million renter households existed in the U.S. in 2015 (the latest data available), according to the Census Bureau’s American Community Survey — about 37% of all households. Of those, 20.7 million are “nonfamily” households which may contain only one person – the householder – or two or more unrelated people: In other words, roommates.

In 2006, overall renter household formation – both family and non-family — decreased as the housing boom began to peak. Total nonfamily households (both owner and renter) increased by an annual average of almost 8.0 million since 2007, and nonfamily renter households increased by an annual average of 333,000 in that time.

From the chart below, it is clear that single-renter households increased each year since 2006, while roommate renter households decreased in 2006 and increased each year after. The number of nonfamily householders with roommates has increased through 2015, but has leveled off at around 130,000 for the past two years. On average, almost 120,000 additional roommate-renter households and about 200,000 single-renter households were created each year since 2007.

The number of single-renter outpaced roommate-renter household creation in all but two of the past 10 years. However, single-renter household growth averaged 1.4% since 2007, while roommate-renter households averaged 2.9% in that period. In fact, the period of strongest roommate-renter household growth was in the Great Recession year of 2009, when they increased 4.8%. Another surge in roommate-renter household growth occurred in 2013, when home prices were spiking and job growth remained moderate. It appears that doubling and trebling of roommates is still popular.

Separating the roommate renter households by age group, we see an expected pattern of higher household formation for the prime renter age group of 15-34 year-olds (see following chart). In 2006, more than 180,000 fewer roommate-renter households headed by 15-34 year-olds existed in the run up to the housing bubble, as this age cohort increased its share of homeownership. As the effects of the housing bust and Great Recession took hold, more of these younger roommate-renter households were created each year, with a peak of more than 150,000 in 2009.

Growth of 15-34 year-old roommate-renter households stalled in 2010 and 2011, but increased from 2012-2015 as the economy continued its moderate recovery. The job growth that has occurred in this recovery has been dominated by lower-paying jobs in retail trade and food services, forestalling strong growth in single renters living alone and pushing more young renters into roommate situations.

A couple of other points evident from the data:

  • The surge in roommate renter households in the 35-64-year-old group in 2010 are likely the former homeowners who lost homes to foreclosures, many of whom should not have qualified for mortgages in the first place.
  • Interestingly, roommate-renter households created by the 65 and older group have started to increase, averaging more than 15,000 new such households annually since 2011 — 23,588 in 2015 alone.

Read the original article here.

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Global Investors Bypass Gateway Cities For Better Returns

Concerns about Brexit, the future of the European Union and the Chinese economy keep investors flocking to the U.S. for stability, but high prices in core markets are causing foreign buyers to look for better returns elsewhere. Gateway cities such as New York, Los Angeles and Miami are becoming overheated, and investors have begun to look at other markets, like Denver, Phoenix and Nashville, as more viable options due to their healthy economies and the strength of the energy and manufacturing sectors, Business Insider reports. In addition to this, the cost of doing business is significantly cheaper in some of these markets.

During an interview with Bisnow in April, Madison Marquette Chief Operating Officer and Senior Managing Director of Investments Peter Jun said that while major urban gateway markets would continue to attract foreign investment, secondary markets with high-quality assets would also emerge as contenders for foreign investment capital.

Even with a shift to second- and third-tier markets, the investments are positive for the U.S.

Additional capital in local markets can create construction jobs, add new space for companies and free up capital for sellers of existing assets in order to allow them to put it into other investments. The downside is that it could lead to price inflation in markets that are currently affordable.

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