RubinBrown Apartment Stats 2016

EXECUTIVE SUMMARY

Industry Update The multifamily rental housing industry had another good year in 2015. Although there were a large number of new properties completed in 2015, the demand continued to outpace the supply. The rents continued to increase while the vacancy rates remained relatively steady. The growth that we have seen in the rental housing market over the past years indicate that rental units are indeed a growing market within the housing industry and not just a temporary correction from the prior recession. According to the Multifamily Outlook 2016 published by Freddie Mac, in 2015, 306,000 family units were completed. Freddie Mac indicates that this is the most units entering the market in a single year since 1989. The study goes on to say that the level of multifamily supply is expected to remain elevated over the next few years, given that the number of new construction permits rose again in 2015. Despite the increase in interest rates by the Federal Reserve Bank in December 2015, the Freddie Mac publication indicates that in the short-term, the price growth and capitalization rates will not be significantly impacted in the multifamily rental housing market. The rental market continues to grow each year. In 2015, 36% of all households were renting. According to the Joint Center for Housing Studies of Harvard University this is the largest percentage since the late 1960’s. The study also says that in the past decade the number of renters has increased by nine million, which is the largest ten-year gain on record. This increase in rental demand has been across all income levels, age groups and household demographics. The increase is attributed to an aging population, the increase in baby-boomer renters and the mobility provided by renting preferred by single people and families without children. Millennials (born 1982–2004) are experiencing less purchasing ability because inflation is out pacing their salaries. In fact, several studies point to a trend that millennials are renting for a higher number of years than previous generations. According to the Survey of Market Absorption , new multifamily units are being constructed with fewer bedrooms than those built over the last 20 years. More than 50% of the unfurnished, market-rate rentals in structures of more than five units are studios or one-bedroom apartments.

While the number of low and very low income households continues to grow, the number of renters receiving assistance from the U.S. Department of Housing and Urban Development (HUD) is falling. This decline results in millions of households trying to find affordable housing in the private market. There has been increased pressure on state and local governments to assist these households as the federal response has not been strong enough. Market Trends Homeownership has continued to decrease to its lowest level in nearly 50 years. While the decline is especially large among the first-time home buyers group, we must also look at forfeitures. Corelogic estimates that more than 9.4 million homes, were forfeited through foreclosures, short sales and deeds in lieu of foreclosure from 2007–2015. Although forfeitures have continued to decline, they remain at twice the annual average rate from before the start of the housing crash in 2007. According to the Bankers Association the share of loans that are seriously delinquent (90 days or more past due or in foreclosure) has also fallen, but is currently at double the average of the first half of the 2000’s. We are likely to see continued downward homeownership rates over the next several years. According to the State of the Nation’s Housing 2016 , published by the Joint Center for Housing Studies of Harvard University, cost-burdened renters are at an all-time high. The number of households paying more than 50% of their income has grown to 11.4 million. The lowest-income renters’ (earning less than $15,000) is very high at 72%. In most market areas, at least half of the lowest-income renters have a severe housing cost burden. The nation still has a serious affordable housing issue. The demand for low-cost units is exceeding the supply. The gap between the supply and demand is the greatest for extremely low-income renters (earning up to 30% of the area median) but also is high for very low income renters (earning up to 50% of the area median). A study conducted by the National Low Income Housing Coalition found that for every 100 extremely low income renters there were only 31 units available and for every 100 very low income renters there were only 57 rental units available.

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