Tuesday, April 27, 2010

U.S. Census Bureau Pegs Portland Metro Rental Vacancies at 3.8% - Nation's 2nd Lowest

The U.S. Census Bureau has just reported 1st quarter 2010 vacancy rate estimates for the top 75 U.S. Metropolitan Statistical Areas (MSAs).

The Portland/ Vancouver/ Beaverton area ranks 2nd in the nation for vacancies at 3.8% a 3-way tie with Fresno and Grand Rapids.  Portland's Q4 2009 vacancy rate was estimated at 5.3% - the new estimate shows a drop of 1.5% over the past 3 months.
The Census Bureau reports the nation's lowest vacancy rates as follows:
  • Boston-Cambridge-Quincy, MA-NH - 3.6%
  • Fresno, CA; Grand Rapids, MI; and Portland, Beaverton, Vancouver OR/WA 3.8% (3-way tie)
  • Rochester, NY - 4.8%
  • columbus, OH - 4.9%
  • Oxnard-Thousand Oaks-Ventura, CA - 5.7%
  • El Paso, TX - 6.0%
  • New York-Northern New Jersey-Long Island NY; Raleigh-Cary, NC 6.2% (2-way tie)
  • Oaklahoma City, OK - 6.3%
  • Alburquerque, NM; San Francisco-Oakland-Fremont, CA - 6.5%
The MSA's with the five highest vacancy rates were as follows:
  • Orlando, FL - 20.6%
  • Phoenix-Mesa-Scottsdale, AZ - 19.8%
  • Jacksonville, FL - 19.5%
  • Tulsa, OK - 19.3%
  • Detroit-Warren-Livonia, MI - 17.7%
Read the full report online.

Wells Fargo Reports: Consumer Confidence Rises Solidly in April

The Wells Fargo Economics group reports today that Americans' perceptions that labor market conditions are continuing to improve helped pull the Consumer Confidence Index higher in April.

The overall index rose 5.6 points to 57.9, the highest reading since September 2008. Even though the Consumer Confidence Index has increased only modestly from its recession lows, attitudes have improved enough to drive healthy gains in spending. Overall retail sales increased at an 11.03 percent annual rate during the first quarter, with spending rising for motor vehicles and a broad assortment of spending categories.

Monday, April 26, 2010

The Role of Insurance in FHA and ADA Violation Claims

By Seth Shapiro, USI Risk Strategist

Over the past several years, multifamily housing developers and owners have been defendants in several lawsuits filed by government enforcement agencies, such as the United States Department of Justice (DOJ), private disability rights organizations, and individuals alleging violations of the Fair Housing Act (FHA) and Americans with Disabilities Act (ADA).

Damages and attorneys’ fees claimed by plaintiffs in these lawsuits, including costs to modify existing buildings to comply with applicable accessibility guidelines, have created significant financial exposure to the multifamily housing industry. Learn More > > >

Rent Growth: Portland Ahead of National Average

The Portland-Beaverton-Vancouver MSA outperformed the nation in terms of first quarter rent growth, according survey results released this morning by RealFacts. The March survey of 100-plus-unit communities found the national average rent was $943, 1.3% higher than the first quarter of 2009, while the average rent for the Portland-Beaverton-Vancouver MSA rose 2.2% to $839. Average occupancy in the MSA climbed 40 basis points to 93.7%.

The local average was pulled down by Portland, which posted the MSA’s lowest average occupancy at 91.9%, down 140 basis points from 1Q09, but the decrease was offset by a 1.7% increase in the average rent to $966. The highest average occupancy in the region was Lake Oswego at 95.6%, up 280 basis points year-over-year. Lake Oswego also had the highest average monthly rental rate at $1,014, down 1% from the first quarter of 2009.

Vancouver’s average occupancy was 95.1%, up 360 basis points from 1Q09 while its average rent fell 1.7% to $774. Beaverton’s average occupancy increased 150 basis points to 94.6% but that was more than offset by a 6.5% decrease in its average rent to $761, according to RealFacts.

The Eugene-Springfield MSA’s average monthly rent in the first quarter of 2010 came in at $856, up 3.1% from the same first quarter of 2009. Average occupancy there climbed 130 basis points to 96.7%, according to RealFacts. The Salem MSA posted an average monthly rent of $668, off 1% from 1Q09, but average occupancy there jumped 390 basis points to 93.1%. In Medford, average rent was $725, down 2.3% from 1Q09, while average occupancy gained 130 basis points to hit 95.3%.

Statewide, average occupancy was 93.6% in Oregon and 93.5% in Washington, according to RealFacts. The average monthly rents for the two states were $846 and $962, respectively.

Getting back to the national data, the Charlotte and Phoenix MSAs led the way nationally with first quarter rate increases of 4.6% and 4.5%, respectively, while the Salt Lake City, Baltimore and Denver MSAs each posted a 3.5% increase. Charlotte’s average first quarter monthly rent was $687, which is 2.2% higher than the same year-earlier period while Phoenix’s average first quarter monthly rent, $725, is 6.6% below 1Q09, according to the report. Average occupancy in Charlotte was 90.9% on average, up 150 basis points from 1Q09. First quarter average occupancy for Phoenix was 88.3%, up 110 basis points.

To review the report on the Portland-Beaverton-Vancouver MSA, click here. For the national report, click here.

Tuesday, April 20, 2010

Demographics, Development, and Demand: Is Housing Headed for Another Bust or Robust Times?

By James D. Howsley

At least twice a day over the past six months, various clients, consultants, friends, and even family members have asked me for a prediction about the real estate development market. Every time it is asked, I hear this Shakespeare quote over and over in my head: “The fool doth think he is wise, but the wise man knows himself to be a fool.” So I don’t make gut-level prognostications because without some sort of evidentiary support, that kind of rambling should remain the province of cable-news networks. But for those willing to look at good demographic information, historical trends, and current inventory levels, a window into possible recovery scenarios for housing in the nation and the Northwest emerges.
...the data above suggests that if the industry does not see an increase in production in the total number of units, whether single-family or multifamily, we will be headed for a supply shortage in the next couple of years. My strongest fear is that by sitting on the sidelines until banks loosen up lending, we might be headed for a whipsaw in the real estate market and cascade right back into frenzied times when the supply cannot meet the demand...
Let’s start with a quick history lesson. From 1978 until the end of 2007, the annual housing starts nationwide (single-family and multifamily units) averaged about 1,544,000 annually. In 2008, housing starts dropped below a million to about 906,000. And in 2009, that number slid even further, to just about 550,000. But when you factor in the robust years of 2003 to the end of 2007, housing production rose above the historical average to about 1.8 million units a year, a difference of about 256,000 units a year from the historical average. Multiplied out over the 2003-2007 cycle, this means that about 1,280,000 more units were produced than the historical average. But if we factored in the 2008 and 2009 numbers against the historical average, the number of units produced would seemingly correct the overproduction during the robust cycle of 2003-2007. That would seem to indicate that we are already in the trough of unbuilt demand and that in 2010 we should see an increase in housing demand, with returns to historical averages sometime later this year. But housing starts are still fumbling about, especially in some markets. What could cause this discrepancy?

Read more > > >

Understanding Health Reform and the Potential Cost Impact - April 29th Seminar

USI Nothwest is pleased  to announce a series of seminars in Portland to help employers work through the newly passed Health Care Reform Bill. 

The first event takes place April 29th from 8:30-9:45 a.m. at the Liberty Centre Auditorium, 650 NE Holliday Street, Portland OR.  Seating is limited and no-host parking is available in garages near 7th and Holladay. There is a MAX stop at NE 7th Street. 

USI will continue to closely analyze developments and will communicate information via future webinars, publications and seminars to interested parties.

RSVP to todd.gunderson@usi.biz or call 503.295.8309.

OR & WA Set Temporary Rules On Carbon Monoxide Alarms - Effective July 1

Oregon's State Fire Marshal has finalized some "temporary" rules for carbon monoxide alarms.  Comments are due by October 1 2010 and permanent rules go into effect 12/1/2010.

Last year, the Oregon legislature passed legislation requiring carbon monoxide alarms in most homes that contain a heater, fireplace, appliance or cooking source using natural gas, coal, kerosene, wood or other fuels that emit carbon monoxide through combustion.  The law also applies to residences with attached garages that have an opening directly into a living space.  See the rules for additional details.

The effective date for new tenancies: July 1, 2010 and the effective date for all existing tenancies: April 1, 2011.

In Washington State, July 1 2011 is the deadline for installing carbon monoxide alarms in all multifamily units - no exceptions. The effective date for new construction: January 1, 2011. Read the Washington State rules here.

Monday, April 19, 2010

Gerding Edlen Raising Money for Green Rentals

Gerding Edlen Development is looking in part to the apartment market in the wake of some $100 million in losses for its investors related to troubled condominium developments in Portland and Bellevue, according to Ryan Frank of the Oregonian. 

Mark Edlen reportedly said the firm’s current investment strategy includes “green” infill apartment developments and older commercial building rehabs, and he specifically cited 20th and Hawthorne as the type of project that he thinks will work, according to Frank. 

To that end the company has created Gerding Edlen Green Cities I LP, a would-be $500-million private equity fund for its new focus, according to the SEC, and had taken in $40 million as of late December.

Frank’s post was a follow-up to the story he and Jeff Manning wrote about Gerding Edlen’s sharp change in focus in the wake of handing three ground-up condo projects back to lenders, losing approximately $100 million of investor equity. For that story, click here.

Thursday, April 15, 2010

HFO Apartment News Roundup

REIT executives and their advisers queried by Real Estate Forum are saying that after rolling through leases that hadn’t already been re-priced last year, average rents will bottom out, vacancy will stabilize and the apartment market will be positioned for an upswing to begin in 2011. These advisors credited increasing demand and a lack of new construction for the positive outlook, which will be tempered by the slow growth in employment. Read more at Real Estate Forum the print monthly magazine associated with the commercial real estate news website GlobeSt.com.

The demand for apartments may be coming at least in part from would-have-been homeowners. A recent survey by Fannie Mae found the number of people agreeing that homes are safe investments has fallen 13 percentage points over the past seven years to about 70 percent. Another recent survey by the National Foundation for Credit Counseling found that about half of respondents say homeownership is not a realistic way to build wealth. The polls were highlighted in a Washington Post article over the weekend titled “Economy has shifted Americans' attitudes about homeownership and money”.

Victor Calanog, director of research for New York-based research firm Reis Inc. states in a column  for National Real Estate Investor earlier this week that the national apartment vacancy rate remained flat at 8% in the first quarter instead of rising as it typically does during the colder months thanks to the strongest first-quarter absorption level (20,000 units) he’s seen in the past 10 years. The data, including a mild uptick in asking and effective rents (0.1% and 0.3% respectively) has him thinking the market is on the “cusp of a recovery.”

In the Portland area, average vacancy is 5.6%, according to Mark D. Barry’s winter 2010 report, and the metro area’s average vacancy rate has been decreasing. Barry will present his mid-year report at HFO’s next investor forum in May. Investors wishing to attend may e-mail aaron@hfore.com or call their HFO broker.
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A recent survey by Fannie Mae found the number of people agreeing that homes are safe investments has fallen 13 percentage points over the past seven years to about 70 percent. Another recent survey by the National Foundation for Credit Counseling found that about half of respondents say homeownership is not a realistic way to build wealth.

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The relatively low vacancy helps explain why Urban Development Partners NW LP is building locally. The company is finishing up construction on a 13-unit project at SE 31st and Division and is preparing to break ground on a 26-unit project at SE 38th and Division this summer, according to the Portland Business Journal.  Project equity is coming from its sister company, Willamette Capital Management Ltd.

The current project includes two floors of residential above 8,000 SF of retail. It incorporates an existing one-story structure that used to house Reliable Parts. The project includes a private courtyard for residents. The next project will have three floors of one- and two-bedroom apartments over 5,500 SF of street-level retail. An existing single-family home on the site will be reoriented toward 38th to act as a buffer for the residential neighborhood.  Both projects are classified as high-end, high-design properties with limited amenities. Asking rents are reportedly $2.20 per square foot for units at the front of the building and $1.61 per unit for those at the back, which would put them at the top-end of the close-in Southeast submarket. The development reportedly plans to own the properties long-term. "We’re not out to make a quick buck,” UDP partner Eric Cress told the Business Journal

Wednesday, April 7, 2010

Landlords with Employees - Here is Your Health Care Reform Timeline for Employer Compliance

HFO is pleased to provide you with the following timely information from its sponsor partner USI Northwest Insurance. 

This timeline provides some of the key dates associated with the recently enacted health care reform legislation.

MARCH• Plans in existence on or before March 23, 2010 are considered grandfathered.

Retiree-plan Assistance
A temporary government reinsurance program for employer-provided retiree (age 55-64) benefits. May reimburse up to 80% of the cost of claims between $15,000 and $90,000. Effective June 21, 2010.
Small Business Tax Credits
Tax credits for small business (no more than 25 employees and average annual wage of no more than $50,000). Up to a 35% tax credit when the employer contributes at least 50% of the premium costs. 
Click to download the full 3-page timeline courtesy of USI Northwest/Kibble & Prentice

Tuesday, April 6, 2010

Wall Street Journal: Apartment Rents Rise

Today's Wall Street Journal features an article titled "Apartment Rents Rise as Sector Stabilizes."

U.S. apartment vacancy rates stopped rising and rents increased modestly in the first quarter of 2010. National vacancy rates for Q1 2010 remained flat at 8%; the highest national rate since Reis -- a New York research firm -- started tracking vacancies in 1980. Reis reported that rents rose in 60 of the 79 markets they track.
The difficulty in obtaining financing for new construction is limiting new apartment supply for the coming years, leaving landlords and investors excited about the potential for rents to pop once the economy gathers steam.
In January, Reis reported that the nation's apartment vacancy rate ended the year at 8 percent, the highest level since the research firm began tracking such statistics in the top 79 U.S. markets three decades ago. Nationwide, rents dipped 3 percent in 2009, led by declines in San Jose, Seattle and other cities that witnessed brisk growth until the recession.

Today, the national vacancy rate remains at 8% while Portland's vacancy rate continues to be one of the lowest in the nation, hovering around 5%.

Sold! 56 Units in Vancouver, WA - for $2.2 million

HFO is pleased to announce the sale of Cedar Lane Apartments in Vancouver.  The property consists of an attractive mix of 1, 2 and 3 bedroom units with large, desirable floorplans and is convenient to area freeways and transit.  Cedar Lane sold for $2.2 million.

Despite the Economy, More Families Move to Portland in 2009

U-Haul reports that Portland ranked #3 in net in-migration nationwide for 2009.  In its recently released "2009 Top U.S. Growth Cities Report" U-Haul states that there were 10.16% more families moving into Portland than moving out. Ranking #1 was Bronx, NY at 17.22% followed by Houston at 10.80%.  The report reflects communities with more than 5,000 families moving in or out of an area. Rounding out the top 10 were Dallas, L.A., Indianapolis, Tampa, Orlando, Charlotte and Van Nuys.