We are excited to share a link to download our latest issue of the annual HFO newsletter, The Northwest Apartment Investor. This year, in addition to our usual updates on PNW markets and outlook on the year ahead, we include an interview with Washington Lt. Gov. Denny Heck, an article about parking reform by Catie Gould of the Sightline Institute, and more.
Click here or below to download your copy now!
This month on HFO-TV, broker Aaron Kirk Douglas speaks with leaders of two Oregon modular construction companies to learn more about the growing industry.
Kendra Cox of Aumsville-based Blazer Industries tells us about the basics of modular construction and how they work with their clients, including the benefit of working with a modular construction company during the current shortage of construction laborers.
"It's hard to find contractors and people to put the building together generally in certain locations. On the one hand, contractors are very busy right now, and so when a group can't find a local contractor, they may come to a modular builder."
Nathan Young, CEO and principal builder of MODS PDX, discusses how he came to work in modular construction and its benefits to developers and the planet.
"When you think about the fact that we're building four, five, six projects all at one location, it means we're not driving all over town," Nathan tells us. "There's obviously a fuel impact there, but it's also we're able to recycle a lot more materials because things that would otherwise fall under the off the into the mud and not be utilized, fall onto the ground, onto the, onto the cement. They're dry, they're still clean, we can take them over to a table saw, turn them into something else. So, we have a lot less waste just because we're able to reuse products in different formats."
When asked about the reason behind the reported surge in modular construction's popularity, Kendra pointed out the urgent need for affordable housing of all kinds, and Nathan shared that he sees this as the natural development of the industry.
"Essentially, as we're able to move towards more technologically advanced systems and approaches, we can move the construction into an offsite world where we can now know that we're going to build it the same way," Nathan says. "The analogy that I use a lot for people is the same way that your custom cabinets are built inside your kitchen. The cabinet maker comes to your house, measures the cabinets, leaves, he doesn't go into your garage and set up a table saw and a chop saw and start cutting the cabinets ... we have the same capacity now to go and measure a site or look at a site, draw it up, and then go build it off-site and bring it to the site and know it's going fit just the same way that we do other forms of carpentry."
The percentage of residents who can afford the monthly payment on the median home sold has declined throughout the metro area, as "rising interest rates have pushed ownership affordability to its worst point in recent decades," writes Oregon state economist Josh Lehner in an update on homeownership affordability using recently released November home sales data. But there is good news on the horizon, Lehner advises.
"The combination of lower interest rates, rising incomes, and falling prices this year and next will bring overall affordability back to the historical range," he writes. "Sales volumes and housing starts will revive along the way."
In the Portland Metro:
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| Oregon Office of Economic Analysis (oregoneconomicanalysis.com) |
In Bend:
The Multnomah County government will decrease the number of tarps, tents, and other supplies given to local nonprofits to distribute among Portland's houseless community, according to the Joint Office of Homeless Services (JOHS).
The news accompanied headlines citing the more than 22,000 tents and 69,000 tarps purchased at a cost of more than $2 million for the homeless over the past two years.
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The Daily Journal of Commerce (DJOC) quotes a county spokesperson as explaining, "With public buildings, day centers, libraries, even coffee shops closed, and shelters operating at reduced capacity to reduce the spread of the COVID-19 virus, the JOHS used relief funds to provide emergency supplies to people to be able to survive outside until vaccines and reopening."
Local attorney John DiLorenzo has filed a federal lawsuit to compel the city to remove tents on sidewalks, arguing this practice violates the Americans with Disabilities Act.
Funding for the purchases was reduced from $3.1 million to $1.2 million in the budget that took effect on July 1st, and in August, organizations distributing the supplies were notified by email that they could not visit the warehouse as often and that limits would be placed on the number of items that could be picked up each visit.
"We continue to offer life-saving supplies during weather events, as well as work with groups all year to assist those still facing exposure daily as staff and budget allows," the county spokesperson told the DJOC.
However, DiLorenzo points out, these efforts have a significant impact on another segment of the population.
"The city should terminate its relationship with the JOHS and, instead, use its dues to finance its shelter first policy and keep the sidewalks clear of obstructions so those with disabilities can have their lives back," DiLorenzo told the DJOC.
Read more at PamplinMedia.com
With energy rates on the rise, here's the latest from Tacoma Public Utilities on their available water and electric incentives. Many utilities in the Pacific Northwest offer similar incentives. Be sure to check with your provider if you think one of these programs can save you or your tenants some money on utility bills. Thanks to Rochelle Gandour-Rood, water program specialist for Tacoma Water, and to Sarah Bowles, conservation program manager for Tacoma Power for the information!
Despite insufficient housing supply, vacancies are increasing, the National Multifamily Housing Council (NMHC) reports in a recent post. "Households are doubling up, moving back home, or deciding not to create new households at all," according to NMHC, citing RealPage data showing annual rent growth from the first quarter of 2022 through the third moderated from 15.3% to 10.5%, while rents decreased for the past two consecutive months.
However, they caution, this doesn't mean we should ignore the desperate need for housing nationwide. "Long-term, however, apartment demand is expected to rebound with improved economic confidence, which means we need to keep building new housing despite this temporary lull if we want to avoid large rent increases in the future."
The group urges long-term thinking beyond quick fixes like rent control and eviction moratoriums, which the post's authors point out don't address the underlying supply shortage. To affect real change, landlords and lawmakers must work together, they remind, suggesting the federal government can encourage development to meet the housing shortage by:
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| via NMHC | Rising Rents? Blame the Supply Shortage |
Read
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| via OregonEconomicAnalysis.com |
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| via OregonEconomicAnalysis.com |
According to Newmark's Third Quarter 2022 United States Multifamily Capital Markets Report:
Carl Whitaker, Director of Research and Analysis for RealPage Analytics offers an update for the Pacific Northwest multifamily market, and Blake Hering of Gantry, Inc. provides a lending market update.
The number of people identified as homeless increased 30% from 2019 to 2022, according to a recently released report from the Multnomah County Joint Office of Homeless Services.
As part of a federally required annual survey, more than 2,000 people facing homelessness were asked if COVID-19 was a reason for their homelessness. Twenty-four percent of them answered "yes."
The most recent count, conducted on Jan. 26, 2022, found that 5,228 people in Portland and Multnomah County were experiencing homelessness, of which 58.5% were unsheltered, 28.4% were in emergency shelters, and 13.1% were in transitional housing.
Although Black, Indigenous and other people of color represent just 34.3% of the Multnomah County population, 38.9% of the homeless people surveyed identified as BIPOC.
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| Source: 2022 Point-in-Time Count of People Experiencing HUD Homelessness in Portland/Gresham/Multnomah County, Oregon on January 26, 2022 | Multnomah County Joint Office of Homeless Services |
The data mostly likely represents only a portion of the unsheltered population in Portland, the report notes, citing the difficulty of "finding and surveying everyone who is living unsheltered in a week's time."
Read the full report here.
Portland’s multifamily sector showed steady improvement in 2022, according to the early autumn report for Portland released by Yardi Matrix
Overall asking rent in the Portland metro increased to $1,759, slightly above the $1,718 nationwide rate. On an annual basis, rates in Portland were up 9.9%. Lake Oswego (11.3% annual growth to $2,436 per month) and the Pearl District (3% annual growth to $2,121 per month) remained the most expensive areas.
Portland employment grew 5.2% in the 12 months ending in September, "fairly fast compared to the 50-largest metropolitan areas nationally," writes Workforce Analyst/Economist for Multnomah County Jake Procino in the most recent Multnomah County Economic Indicators report.
The city also passed an important milestone this summer, according to Procino, having recovered all of the jobs lost in early 2020 by July 2022. Meanwhile, Portland's September unemployment rate of 3.6% was nearly equal to the national rate of 3.5%.
Read the full report at QualityInfo.org, the Oregon Employment Department's workforce and economic information website.
Featured this week: The latest headlines from multifamily news in Washington State and the U.S.
According to a recent analysis by the Portland Business Journal (PBJ), in terms of major crime rates, Portland is relatively average compared to the 40 markets in which Business Journals are published.
PBJ reporters examined per capita murders, assaults, and robberies in these markets in the first half of 2022 to rank from lowest (denoting less per capita crime) to highest. Portland ranked 21st.
Compared to the same period in 2021, murders in Portland were down to 41 from 48, while the number of aggravated assaults dropped to 1,619 from 1,675.
Overall Rankings:
1. Boston
2. Austin
3. Raleigh
4. San Jose
5. Columbus
6. Jacksonville
7. Tampa
8. Charlotte/Mecklenburg County, North Carolina
9. New York
10. Miami
11. San Francisco
12. Honolulu
13. Wichita
14. Seattle
15. Orlando
16. Pittsburgh
17. Cincinnati
18. Los Angeles
19. Phoenix
20. San Antonio
21. Portland
22. Minneapolis
23. Sacramento
24. Louisville
25. Denver
26. Buffalo
27. Washington, D.C.
28. Dallas
29. Atlanta
30. Nashville
31. Chicago
32. Kansas City
33. Philadelphia
34. Albuquerque
35. Houston
36. Cleveland
37. St. Louis
38. Milwaukee
39. Memphis
40. Baltimore
Visit BizJournals.com/Portland to learn more about the individual metrics used to create the ranking.
Congratulations to the HFO team and brokers Greg Frick and Lee Fehrenbacher on the sale of 90-unit Stonecreek Apartments in Portland, OR.
The average wait time for one of Portland's subsidized, affordable housing units is five years, according to data commissioned by Mayor Ted Wheeler’s office.
The data, produced by Home Forward, used the 35,758 households currently on waitlists for 5,373 units that are owned, managed, or subsidized by Home Forward to calculate the average wait time. Willamette Week reports this likely captures anywhere from a quarter to a third of the city’s total deeply affordable units.
The report finds that one-third of the applicants currently on the Home Forward building waitlists are Black, another third is white, and of the 1,621 current applicants on the waitlist, 1,400 are categorized as “extremely low income.”
“Spiking increases in untreated mental illness and drug addictions make these years-long housing wait times deadlier than ever. We need more affordable housing and we need to connect more houseless to health services while they wait,” said Mayor Wheeler in a press release published last week.
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| Chart created using data retrieved on October 25, 2022 from Portland.gov/Wheeler |
Read more at WWeek.com.
Landlord engagement specialist Alexis Eykel along with program ambassador Mark Melsness of Spinnaker Management discuss the City of Tacoma's support for landlords housing low-income tenants. Tenants have an ongoing case manager and the housing provider receives guaranteed rental income. Tacoma Housing Authority is one of 39 housing authorities in the United States that are part of "moving to work," which provides substantial additional assistance.
Multifamily NW released its Fall 2022 Apartment Market Report this morning at the Apartment Report breakfast.
The Portland/Vancouver rental vacancy rate remained flat below 4%, and rent growth is up 0.5% since Spring 2022.
According to Moody’s Analytics, multifamily net absorption came in at about 21,000 units nationally in the third quarter, “notably low” compared to the 84,040 units absorbed in the first half of the year.
Vacancy increased in 15 of the 79 primary U.S. markets tracked by Moody's, 10 more than in the second quarter.
"While still historically robust, rent growth looked tame compared to the skyrocketing growth established a year ago. The likely culprit: affordability issues are finally squeezing some household budgets," wrote Moody's economists in a Q3 2022 Preliminary Trend Announcement this month.
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| from CRE.MoodysAnalytics.com Source: Moody's Analytics CRE |
Read the full report at CRE.MoodysAnalytics.com
Featured this week: a national market outlook, lender update with Gantry, Inc., and construction and market trends from around the state.
On our most recent episode of HFO-TV, Oregon Housing and Community Services (OHCS) Executive Director Andrea Bell discusses the agency's 2023 legislative agenda, including the "audacious and appropriate" proposed budget that is the largest request in OHCS history.
"We have to invest in resources, invest in a course of action to meet the scale of the crisis," Director Bell tells HFO founding partner Greg Frick.
Check out previous episodes of HFO-TV on YouTube or HFORE.com/aspx.
Meet Washington Multifamily Housing Association's new Director of Government Affairs, Ryan Macinster. Ryan is the organization's lead lobbyist in Olympia and various municipalities throughout the state.
Multi-Housing News interviewed industry executives and market experts about how the highest interest rate increase in decades will impact multifamily.
Their predictions include:
Congratulations to the HFO team and brokers Rob Marton, Cody Hagerman, Greg Frick, and Tyler Johnson on the sale of 56-unit Murdock Apartments in Sherwood, OR.
Redfin has ranked the country's slowing housing markets in terms of prices, price drops, supply, pending sales, sales-to-list ratio, and speed-of-home sales. Seattle was first on the list, while Portland registered at 14th.
“These are all places where homebuyers are feeling the sting of rising home prices, higher mortgage rates and inflation very sharply. They’re slowing down partly because so many people have been priced out and partly because last year’s record-low rates made them unsustainably hot,” said Redfin Chief Economist Daryl Fairweather in a release. “The good news is that the slowdown is dampening competition and giving those who can still afford to buy more negotiating power.”
Read more at BizJournals.com.
This week our update includes the latest forecast on interest rates, unemployment, and the likelihood of a recession.
GlobeSt.com reports multiple sources are registering multifamily rent growth has slowed, with Redfin publishing data indicating August rents increased at the slowest rate since December last year.
According to Redfin, August median asking rents grew 11% year-over-year (0.4% month-over-month) – the smallest hike in a year – to $2,039, the slowest growth since December 2021 and down from a 1.6% increase a year earlier.
Redfin Deputy Chief Economist Taylor Marr pointed to higher interest rates impacting the rental market and having "put a damper on spending power in the economy as a whole, including renters’ budgets."
Read more at GlobeSt.com.
Congratulations to HFO Broker Greg Frick and the rest of the HFO team on the sale of 12-unit Omega Townhomes in Hillsboro, OR.
Visit HFORE.com/transactions.aspx to learn more about recent HFO transactions.
This special interview features attorney Quinn Posner of Northwest Landlord Solutions. Quinn is an attorney licensed to practice in Washington and Oregon. In this interview specifically relevant to multifamily owners in Washington, Posner states:
This week: How the Inflation Reduction Act will affect the multifamily sector, Oregon's maximum rent increase for 2023 explained, and why multifamily rent growth stalled in August 2022.
Listen wherever you get your podcasts, and check out the full library of HFO's Multifamily Marketwatch podcast at HFORE.com/aspx.
On our most recent episode of HFO-TV, Oriana Magnera, Verde’s Energy and Climate Policy Coordinator, discusses the resources available to landlords through Oregon's new heat-response programs and the nonprofit group's efforts to distribute portable cooling units to those in need.
Watch the full interview on YouTube or at HFORE.com/videos.aspx.
Visit HFORE.com/transactions.aspx to learn more about recent HFO transactions.
Check out the latest episode of the HFO Multifamily Marketwatch podcast! This week, Elliott Barnett, Senior Planner, City of Tacoma, discusses the Home in Tacoma housing plan with Broker Aaron Kirk Douglas.
Governor Inslee announced the end of all COVID emergency orders effective October 31, Seattle multifamily housing construction reaches new highs, and a Seattle citizens group has landed an initiative on the ballot to create a low-income housing development agency owned and operated by the city.
Subscribe today on all podcast markets.
However, for the first time since June 2020, the national average multifamily rent declined, decreasing $1 to $1,718 in August. Year-over-year growth decelerated to 10.9%.
The report attributes moderating rent growth to typical seasonality, slowing migration, and the cooling economy.
"The deceleration in August was strongest in many of the markets that have had the most growth over the past two years, a sign that affordability is becoming an issue."
Year-to-date rent growth is still higher than any previous year with the exception of 2021, and the national occupancy rate was 96.0% for the fifth month in a row in July.
Portland Employment and Supply Trends; Forecasted Rent Growth
Read the full report at YardiMatrix.com.
