The Income Property Blog
Author Archives: Robert
April 2012 Mortgage Rate Indices
Here again are the latest rates commonly used for variable rate apartment loans:
Note: All rate indices are lower this month. The 12-MTA Rate is again at it’s lowest level in 10 years.
S.F. Apartment Construction Boom Around the Corner
With Bay Area apartment rents continuing to increase, it should come as no surprise that apartment construction would be stirred into action:
After hibernating for years, apartment construction is poised to boom in San Francisco, where desperate renters say those high-rises can’t rise high or fast enough.
Largely in response to the city’s growing technology sector, 22,000 residential units are in various stages of approval and construction. In a few years, residents could be signing leases for new addresses in South Beach, South of Market, Central Market and Mission Bay.
The Bay Area Remains the Hottest Area in the Country for Annual Effective Rent Growth
The Bay Area in Northern California remains the hottest area in the country for annual effective rent growth. For example, San Francisco and San Jose have pushed rents more than 10% since February 2011.
In its latest research, Axiometrics Inc., a provider of data and advisory services on the apartment market, reports that sequential rent growth in February 2012 was the highest it has been since June 2011, with effective rent (rent net of concessions) increasing by 0.66% from January to February. Likewise, the national occupancy rate improved on a sequential basis for the first time since August 2011, increasing from 93.36% in January to 93.57% in February. This was the highest month-to-month gain since April 2011, and the third highest in the last 18 months. The combined effective rent and occupancy growth rates–0.87%–provide a potential monthly revenue growth figure, and exceed every month since May 2011.
MPF Research: U.S. Apartment Market’s Revenue Grew 1.1% in Q1 (San Jose and San Francisco lead the Nation)
San Jose and San Francisco led the nation in rent growth during the first quarter of 2012:
The U.S. apartment market has experienced 1.1 percent of revenue growth in the first quarter, with the national occupancy edging up 0.2 percentage points to 94.9 percent and effective rents for new leases climbing 0.9 percent.
“An improving economy and still-limited loss of renters to home purchase are helping spur apartment demand,” said Greg Willett, vice president of MPF Research, a division of North Texas-based RealPage Inc. “At the same time, deliveries remain very limited by historical standards.”
Apartment Vacancy Rate Falls to Decade Low
From Reuters…
The Apartment vacancy rate in the first quarter fell to its lowest level in more than a decade, and rents posted their biggest jump in four years, as Americans eschewed home ownership and renting retained its popularity, according to real estate research firm Reis Inc.
The national vacancy rate fell 0.30 percentage points in the first quarter to 4.9 percent, the lowest level since the fourth quarter 2001, according to preliminary results Reis released Wednesday.
SF is the Hot Spot for Rising Tech Generation
A must read article from The Wall Street Journal…
A bidding war broke out in November when a small house in San Francisco’s tightly packed Noe Valley came on the market.
Twenty-two people, including employees of Facebook, Zynga, Google and Pixar, battled for the home. The winning offer was $1.5 million—40% higher than the asking price. The house had a great view, but it was only 1,800 square feet and came with an old kitchen which, like most of the interior, was covered in 1970s plywood paneling. Seen from the curb, there’s hardly any house at all—just a one-car garage and gate leading to small front courtyard.
The inconspicuousness was part of the attraction, said Jasmin Arneja, 42, who bought the two-bedroom house with her husband Gagan, 40, a software engineer at a networking start-up. “It’s the antithesis to these outrageous bizarre Gordon Gekko-esque houses. It just incorporates so much of our values,” said Ms. Arneja, who runs a philanthropic advisory firm.
Housing prices in the San Francisco Bay area are once again soaring, thanks to an infusion of cash from the rising shares of Apple and Google and the initial public offerings by Zynga, LinkedIn, Yelp and soon Facebook, expected to be the largest in Internet history. But while a previous generation of dot-com executives opted for mansions in wealthy San Francisco neighborhoods like Pacific Heights and tony Silicon Valley suburbs like Atherton, this generation is gravitating to modest homes and condos in grittier parts of the city.
Ground zero of the current tech-fueled real-estate boom is the Mission, formerly a majority Hispanic neighborhood on the southern edge of San Francisco that’s close to the main arteries that link San Francisco to Silicon Valley. Median home prices in the Mission grew 44% in December compared with a year earlier. Adjacent Noe Valley had a rise of 31% over that same period, according to the San Francisco Association of Realtors. The average number of days homes sat on the market in both neighborhoods has almost halved over the past year.
That’s in sharp contrast to what’s happening nationally, where the housing market continues to flounder, with the Case-Shiller 20-City index down for the fourth straight month in a row. It’s even an aberration from the San Francisco area (including Oakland), which saw a 5.4% drop in home prices in December from a year earlier.
Real-estate agents say it’s a cultural shift. The new generation of Internet executives—younger than the last generation of dot-commers—eschews the trappings and responsibilities of expensive properties. They want to bicycle, walk or take public transportation. They like living near food trucks and dive bars.
“You can spend a lot of money on a great restaurant here or just $5 on a burrito,” said Christian Niles, 31, who bought a two-bedroom apartment for $585,000 in the Mission with his wife in August because he saw real estate as a good place to store the cash he’d made from selling his app called TrackerBot to Pivotal Labs last summer. He plans to never own a car.
What Tenants Must Earn to Afford Two Bedroom Apartment
From New Jersey Business comes this reminder that rising rents are affected renters nationwide:
New Jersey ranks fourth in the nation for the most expensive place to rent a two-bedroom apartment, leaving nearly two-thirds of renters in the Garden State unable to afford an apartment that size, according to a study released yesterday.
The data, from the National Low Income Housing Coalition, comes as no surprise…
Apartment Construction Is Surging
From Slate.com:
New data from the Census Bureau today on housing permits (PDF) confirms that with rents high homebuilding is making a comeback—especially multi-family structures that must be intended specifically for the rental market. Overall building permits were up 34.3 percent in February 2012 from where they were in February 2011. That includes a 73.3 percent jump in the number of units authorized in structures with 2-4 units (admittedly a small part of the overall marketplace) and a 59.9 percent leap in units authorized in structures with 5 units or more.
What Lies Beneath
Nicholas B. Leone is a project manager for San Francisco based McGinnis Chen Associates, an architectural and engineering firm. Property owners should read Nicholas’ article on stucco issues he’s discovering at some Bay Area properties.
…Real estate was a fun place to be from 2003 to 2007. With minimal investor effort, properties could be bought and rented or sold at huge profits. Eager to join the party, many developers built multifamily projects all across the Bay Area in hopes of striking it rich. Who blames them? In 2005, home, condo and apartment values were rising at such a fast pace, even Time magazine reported on “America’s House Party.” Unfortunately, the bubble soon popped, and the hangover kicked in.
Apartment Loans by Agencies Creating Bubble, Chandan Says
With interest rates on apartment loans at all time lows and the demand for apartment investments strong, Sam Chandan, a real estate economist, issues a report cautioning investors that owners may not be able to refinance when their new adjustable rate loan rises; rent growth may not remain sustainable to service the debt at higher interest rates.
From Blooomberg Businessweek:
Low-cost financing backed by the U.S. government is inflating the values of apartment buildings and threatening to create a bubble, according to a report by Sam Chandan, a real estate economist.