Bluestone & Hockley | Portland Property Management https://www.bluestonehockley.com Portland Property Management Wed, 12 Dec 2018 23:08:30 +0000 en-US hourly 1 https://wordpress.org/?v=5.0.1 Multifamily’s New Math – GlobeSt.com https://www.bluestonehockley.com/multifamilys-new-math-globest-com/ https://www.bluestonehockley.com/multifamilys-new-math-globest-com/#respond Fri, 07 Dec 2018 00:39:11 +0000 https://www.bluestonehockley.com/?p=25648 The apartment asset class is having a numbers problem with deals and development getting harder to pencil in. Still, the fundamentals are strong enough to withstand these issues. What will it take for the seemingly indefatigable multifamily asset class to lose steam? Slowing rent growth? Apparently not as many, if not most, markets have experienced... Read more ›

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The apartment asset class is having a numbers problem with deals and development getting harder to pencil in. Still, the fundamentals are strong enough to withstand these issues.

What will it take for the seemingly indefatigable multifamily asset class to lose steam? Slowing rent growth? Apparently not as many, if not most, markets have experienced a deceleration in rent growth.  Too much supply? Again, that would be no. While the volume of apartment development may seem overwhelming on a macro basis it still falls short of housing demand.

Instead, what investors in this space are more fearful of is the interest rate environment, with a whopping 70% of respondents to a Real Capital Markets survey declaring that the prospect of further increases is having, and will have in the future, an impact on acquisition strategies.

Vic Clark, senior managing director for Hunt Real Estate Capital, notes that interest rates have moved up about 60 basis points over the past year. “In the past 12 to 18 months, lending agencies have found ways to reduce pricing and keep rates low despite interest rate hikes,” he says. “So far, cap rates have held firm, but another 60-basis-point rate increase will be difficult to absorb.”

As it happens, the multifamily sector will probably navigate that issue as well. Its fundamentals are too strong to ignore.

To read the full GlobeSt.com article click here

By Natalie Dolce

Executive Editor of GlobeSt.com

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Loan Originations Wane Despite Demand for Apartments, Industrial – GlobeSt.com https://www.bluestonehockley.com/loan-originations-wane-despite-demand-for-apartments-industrial-globest-com/ https://www.bluestonehockley.com/loan-originations-wane-despite-demand-for-apartments-industrial-globest-com/#respond Thu, 29 Nov 2018 21:06:08 +0000 https://www.bluestonehockley.com/?p=25624 Lenders are acting much differently at this stage of the cycle than they were in the last cycle, when loan terms became ever-more aggressive until the market collapsed. Concerns about rising interest rates and weakening economic growth have led to a slowdown in commercial mortgage originations, particularly in out-of-favor asset types, despite the wide availability... Read more ›

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Concerns about rising interest rates and weakening economic growth have led to a slowdown in commercial mortgage originations, particularly in out-of-favor asset types, despite the wide availability of debt capital.

The Mortgage Bankers Association reported that commercial mortgage originations in 3Q18 fell 7 percent from the same quarter a year ago. The biggest drop came from CMBS, which fell 53 percent year-over-year, and commercial banks, which originated 22 percent less than a year ago, according to the MBA’s survey. Life companies and the GSE multifamily lenders posted slight increases in lending.

The decline in lending is more a reflection of demand than supply. No major source of debt capital is pulling back, and the number of debt opportunity funds is on the rise. However, property sales have dipped about 10 percent nationally, while rising interest rates are discouraging some borrowers from refinancing.

Since bottoming at just over 2.0 percent in September 2017, the 10-year Treasury has increased steadily and has been over 3.0 percent since mid-September. That has increased loan coupons, although loan spreads have generally come down 40 to 50 basis points over the past year, so the cost of borrowing has not risen as much as interest rates. Tightening loan spreads reflect the healthy appetite among lenders to book loans.

Another headwind to originations is the decline in property sales as buyers start to pull back. Sellers are getting fewer bids and – while acquisition yields aren’t yet climbing appreciably – buyers are seeking to price in the fact that rent growth is likely to moderate as the economy slows in coming years.

One way that borrowers are exercising caution is in the increasing demand for floating-rate loans relative to fixed rate. Floating-rate loans provide borrowers with more flexibility to sell or refinance. Some borrowers are paying for interest rate caps that provide certainty for debt-service payments while giving them the flexibility they desire.

To read the full article click HERE

By Paul Fiorilla | November 26, 2018 at 05:20 AM

GlobeSt.com

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Needs vs. Expectations: What Today’s Renters Want – MHN https://www.bluestonehockley.com/needs-vs-expectations-what-todays-renters-want-mhn/ https://www.bluestonehockley.com/needs-vs-expectations-what-todays-renters-want-mhn/#respond Wed, 21 Nov 2018 23:37:07 +0000 https://www.bluestonehockley.com/?p=25591 In partnership with Kingsley Associates, NMHC unveiled the results of its Renter Preferences Report, shedding light on the factors that are most important to today’s multifamily residents. At National Multifamily Housing Council’s 2018 OpTech Conference & Exposition in Orlando, the company unveiled the results of its Renter Preferences Report, in partnership with Kingsley Associates. RE... Read more ›

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In partnership with Kingsley Associates, NMHC unveiled the results of its Renter Preferences Report, shedding light on the factors that are most important to today’s multifamily residents.

At National Multifamily Housing Council’s 2018 OpTech Conference & Exposition in Orlando, the company unveiled the results of its Renter Preferences Report, in partnership with Kingsley Associates. RE Tech Advisors’ Associate Manager Andrew White, moderated the panel that included Fairfield Residential’s Senior Financial Analyst Christine Wachsman, Greystar’s Senior Managing Director Steve Boyack, The Bozzuto Group’s Vice President of Innovation and Product Development Khushbu Sikaria, and NMHC’s Vice President of Industry Communications Sarah Yaussi.

The panelists discussed key takeaways from the data, which included subjects such as parking, short-term rentals, fitness centers, telecommuting spaces, technology and sustainability.

KEY TAKEAWAYS

Of the total respondents of the survey, 94 percent said they still owned a car and 39 percent had two or more. Although there is a rise in the amount of renters looking to live near and use public transportation, 71 percent noted that they wouldn’t move into a community that didn’t offer parking. In addition, 88 percent said they were interested in secure resident parking, putting a higher emphasis on both convenience and safety.

The report also looked at how demographics impacted the outlook of short-term rental options, which has been a growing trend within the multifamily industry. When taking a look at the amount of renters interested in the ability to earn extra income by listing an apartment on a short-term rental site, versus those that would not rent in a building with this option, the data shows a clear pattern when it comes to generational differences. According to the report, more than 40 percent of renters from the age of 25 to 34 were interested in extra income, with less than 10 percent objecting to the idea of living somewhere with this option. However, on the opposite end, less than 25 percent of renters ages 55 to 65-plus were interested in the extra income, whereas more than 30 percent were opposed to living in a community that offered this opportunity.

To read the full article click HERE

MHN – Multifamily News

IvyLee Rosario

November 15, 2018

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Are Apartments rents going to drop, as newly constructed apartments enter the Portland market? https://www.bluestonehockley.com/are-apartments-rents-going-to-drop-as-newly-constructed-apartments-enter-the-portland-market/ https://www.bluestonehockley.com/are-apartments-rents-going-to-drop-as-newly-constructed-apartments-enter-the-portland-market/#respond Fri, 09 Nov 2018 09:00:50 +0000 https://www.bluestonehockley.com/?p=25541 Most residential Landlords in the Portland, Oregon marketplace are more concerned about regulation by City of Portland Commissioner Eudaley’s Rental Services Commission and the Portland Housing Bureau than they are facing the rising apartment vacancy rate. Are they looking in the wrong direction? Fannie Mae’s research team is thumping the drum that the Portland Metro... Read more ›

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Most residential Landlords in the Portland, Oregon marketplace are more concerned about regulation by City of Portland Commissioner Eudaley’s Rental Services Commission and the Portland Housing Bureau than they are facing the rising apartment vacancy rate.

Are they looking in the wrong direction? Fannie Mae’s research team is thumping the drum that the Portland Metro marketplace will find itself overbuilt by potentially 1,500 units a year in 2019 and 2020, as deliveries of new apartments come into the marketplace.

Commissioner Eudaly and tenant advocates should be happy because rents will be probably be adjusted downward and landlords will use aggressive concessions to fill their vacant units.  Developers will do what they can to keep their rent levels at proforma levels, so they can get permanent financing in place. This should bode well for tenants in Portland in the next 12 months.

Too many units?

According to Fannie Mae analysts, the cumulative effect of the rapid growth of housing stock will cause rent increases to slow substantially. Costar confirms that the “amount of new inventory in the pipeline is formidable.” As of September 2018, Costar counted approximately 11,000 units under construction. Expected demand for 2018 is estimated at a robust 6,600 units (CoStar) of which 4,100 have already been delivered as of September 2018.  In the last 12 months, the Portland Metro marketplace absorbed 7,237 units, which is extraordinary.

As you can see from the chart below, the Portland MSA typically has absorbed an average of about 4,000 units per year. Over the last three years absorption has grown from about 4,000 units per year to 7,000 units per year (12-month trailing), as young adults have migrated to Portland for its affordable living costs and livability when compared to San Francisco and Seattle.

  1. Costar 2018 3rd quarter multifamily Market report

In and Out Migration

Oregon’s growth is driven by job creation focused in the urban centers.  For example, Multnomah County received 28,394 migrants Washington County 19,090 Clackamas County 10,172 in 2015 -2016

Metro counties losing people to out-of-state destinations included Multnomah 21,649); Washington 14,818 Clackamas 7,786

According to the Oregon State Employment Department, peak movers both into and out of Oregon have been those aged 26 to 44. In 2015 -2016 the approximate net inflow of new Oregonians was 17,409 (see chart below).

 

2 Clark County grew by 9,095 people in 2017, an increase over 1.95%. It is estimated that 50 – 60 percent of these purchase or move into rental homes. The balance rented apartments, moved into manufactured housing or moved in with friends.

 

3 State of Oregon Employment Department.

Rents:

Rents have been leveling off and, in some cases, dropping, as the additional supply of housing creates competitive pressure.  This is excellent news for tenants as they get to move into new buildings with concessions and sweetheart deals.  Class C and D properties that had been able to increase rents a little when there was a housing shortage, are now faced with pressure to roll back some of those increases or give concessions to fill vacancies.

 

Even with the rent rollbacks, folks on fixed incomes, those on pensions and other government programs, who do not have the ability to increase their income and pay increased rents are stuck in a challenging position, because rents have increased faster than the CPI increases that typically give them the ability to keep up.  The current US President is reducing the funds available to Housing Choice Vouchers (formerly Section 8), squeezing the most financially challenged members of our community. The low-income tenant’s coalition has been putting pressure on city commissioners, which in turn has helped Commissioner Eudaly give birth to the Rental Services Commission.  This group of mostly tenant advocates is looking for any way they can get landlords to rent to tenants that are on the edge of the rental spectrum; those with criminal records, lack of income or adverse rental references.

Median 2 Bedroom Rent Level

Portland, Oregon

   
2015 2016 2017 2018
Year over year increase/decrease 5.30% 4.40% 0.40% -2.20%
Median Rent Level $1,292 $1,350 $1,355 $1,325

Costar 2018 3rd quarter multifamily Market report

Shifting rental pool from houses to apartments

During and after the foreclosure crisis, single-family rentals increased as investors purchased properties at bargain prices and the rental pool expanded when those who lost their homes to foreclosure needed to find a place to live.  As the marketplace has strengthened and home values have increased, investors have sold off their investments and cashed in on the increased values.

 

As you review the chart above you can see that there is a shift in the availability of types of rental homes in the region. The number of apartments continues to increase with new construction, but the overall rental market has expanded less than expected given the decline in single-family rentals.

Conversely, the ownership market has expanded a bit more than the new construction numbers indicate as more homes are being converted from rentals into homes. The impact on the rental marketplace is significant. The number of rental homes has reduced by about 10,000 single-family rentals in recent years. This is equivalent to 1.5 years of new apartment or new single-family supply!

This reduction in rental housing will be exacerbated as the Portland Rental Services Commission and city commissioners adopt more restrictive rental policies. This will force small investors out of the market and make even more homes available for home ownership and less as rentals.  The reduction of low-income housing will deliver a devastating blow to low-income tenants, exactly the reverse of what the city council is trying to achieve.

5

Summary

Over the next two or three years, the Portland apartment market will be faced with an oversupply of multifamily units.  There will be some short-term impact to the rent levels as the marketplace adjusts to the supply and lack of demand.  The biggest impact will be felt by properties that have been newly constructed with higher rent levels.

As millennials mature and grow their families, they will probably create demand for ownership of homes and small plexes and move out of apartments.  The question will be how fast that transition will take place, because it could have a dramatic effect on the absorption of rental housing. .

If apartment rents are too high, tenants will find another less expensive town to live and work in and we will continue with a higher vacancy rate. Apartment owners and developers cannot rely on continued strong job growth, because job growth is forecasted to contract as the availability of labor and a slowing of the economy reduce work opportunities. As job growth shrinks so does the demand for housing.

As a sideline impact of the decisions being made at the Rental Services Commission, we expect that those owners of homes and small plexes will liquidate their Portland assets because the new rules will be too complex. This may drive more tenants into apartments. Unfortunately, many of the less expensive rentals will have been eliminated, as the “Ma -Pa” landlords exit the market.

Bottom line is that rents will adjust to the market, and as supply of rental units exceeds demand, there will be downward pressure on rents. This is particularly the case for new construction and Class A rentals.  Demand for middle-of-the-road rentals, C and B, will stay strong, but rent increases will be limited by the ability of those tenants to afford the rents.

 

  1. Costar 2018 3rd quarter multifamily Market report
  2. https://tdn.com/news/state-and-regional/clark-county-outpaces-multnomah-county-for-new-residents/article_81b6f1ad-ec21-5532-b2a0-e0bc99cfdcb4.html
  3. https://www.qualityinfo.org/-/the-ins-and-outs-of-migration-in-oregon
  4. https://www.apartmentlist.com/rentonomics/rents-growing-fastest/
  5. https://oregoneconomicanalysis.com/2018/10/26/hammer-dont-hurt-em/

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Landlords Should Keep in Mind When Their Properties Serve as Delivery Pick-Up Points – National Real Estate Investor https://www.bluestonehockley.com/landlords-should-keep-in-mind-when-their-properties-serve-as-delivery-pick-up-points-national-real-estate-investor/ https://www.bluestonehockley.com/landlords-should-keep-in-mind-when-their-properties-serve-as-delivery-pick-up-points-national-real-estate-investor/#respond Thu, 08 Nov 2018 23:26:24 +0000 https://www.bluestonehockley.com/?p=25536 We live in an exciting time of change in the consumer retail market. As technology continues to advance and as consumers get more comfortable with making the majority of their purchases on online, companies are forced to streamline their supply chains in order to compete with the on-demand delivery expectations of consumers. A recent UBS... Read more ›

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We live in an exciting time of change in the consumer retail market. As technology continues to advance and as consumers get more comfortable with making the majority of their purchases on online, companies are forced to streamline their supply chains in order to compete with the on-demand delivery expectations of consumers.

A recent UBS report shows that e-commerce represents 16 percent of total retail sales (excluding food and gas), up from 8 percent in 2004. It is projected that between 30,000 and 80,000 brick-and-mortar stores will close as e-commerce continues to garner a larger share of retail sales, expected to be up to 25 percent in 2025. With companies like Amazon and Walmart offering free two-day-shipping, customers have become accustomed to finding an item online, clicking “buy” and having the item delivered within 48 hours, or sooner. While most consumers still look for free or low-cost delivery options, they also expect the option of one-day or same-day delivery, and in many cases are willing to pay a premium for that convenience.

Today, this delivery timeline continues to shrink. Customers are now demanding even one- to three-hour shipping. Demand for fast delivery presents a unique problem for e-commerce businesses called the “last mile problem.”

To read the full article click here

Steven P. Katkov | Oct 17, 2018

National Real Estate Investor

www.nreionline.com

 

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Condominium & HOA Management Newsletter https://www.bluestonehockley.com/condominium-hoa-management-newsletter-2/ https://www.bluestonehockley.com/condominium-hoa-management-newsletter-2/#respond Thu, 08 Nov 2018 23:06:06 +0000 https://www.bluestonehockley.com/?p=25526 CAM Newsletter

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CAM Newsletter

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Apartment Construction Begins to Slow Down – NREI https://www.bluestonehockley.com/apartment-construction-begins-to-slow-down-nrei/ https://www.bluestonehockley.com/apartment-construction-begins-to-slow-down-nrei/#respond Mon, 05 Nov 2018 18:28:20 +0000 https://www.bluestonehockley.com/?p=25508 Apartment developers took out fewer building permits in September, stymied by rising interest rates and construction costs. Apartment building developers may finally take a breather in their rush to build new units. “Starts will begin to slow down soon, translating into more moderate development activity by late 2020,” says Jeanette I. Rice, America’s head of multifamily... Read more ›

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Apartment developers took out fewer building permits in September, stymied by rising interest rates and construction costs.

Apartment building developers may finally take a breather in their rush to build new units.

“Starts will begin to slow down soon, translating into more moderate development activity by late 2020,” says Jeanette I. Rice, America’s head of multifamily research for CBRE Research.

There are still hundreds of thousands of new apartments already under construction, scheduled to open over the next year or so. But rising interest rates, rising construction costs and already tough lending standards are making it more difficult for developers to keep building at the rate they have been. Developers took out fewer permits to build new properties in September compared to previous months.

The shift is a mild pullback, rather than an abrupt move to lesser activity,” says Greg Willett, chief economist for RealPage, a provider of property management software and services.

Strong demand for apartments has kept developers and investors interested in starting new projects despite the growing number of vacancies in many markets. Rents are still rising, even if not as quickly as they had in recent past.

“Development, just like investment, is a lower return environment than in previous cycles. But the very strong appeal of the sector makes this acceptable to market participants,” says Rice.

To continue to read the full article, click HERE.

Written by:

Bendix Anderson | Oct 30, 2018

National Real Estate Investor

www.nreionline.com

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Common Ground Coffee Hour https://www.bluestonehockley.com/common-ground-coffee-hour-3/ https://www.bluestonehockley.com/common-ground-coffee-hour-3/#respond Fri, 26 Oct 2018 17:52:53 +0000 https://www.bluestonehockley.com/?p=25480 B&H Common Ground Coffee Hour: Association Insurance Please join us for our monthly coffee hour and learning workshop. Refreshments will be provided. Join special guest speakers, Vern Newcomb & Sara Eanni of ABI Insurance, and members of the Bluestone & Hockley Management Team for this exciting learning opportunity on association insurance! Topics Include: What does... Read more ›

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B&H Common Ground Coffee Hour: Association Insurance

Please join us for our monthly coffee hour and learning workshop. Refreshments will be provided.

Join special guest speakers, Vern Newcomb & Sara Eanni of ABI Insurance, and members of the Bluestone & Hockley Management Team for this exciting learning opportunity on association insurance!

Topics Include:

  • What does the association cover?
  • What does the owner need to purchase?
  • Claim scenarios and examples.

Register here: CAM Common Ground Coffee Hour 11-14-2018

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Portland rents drop in steepest decline across US – Portland Tribune https://www.bluestonehockley.com/portland-rents-drop-in-steepest-decline-across-us-portland-tribune/ https://www.bluestonehockley.com/portland-rents-drop-in-steepest-decline-across-us-portland-tribune/#respond Thu, 25 Oct 2018 22:20:42 +0000 https://www.bluestonehockley.com/?p=25476 Portland has added some 15,000 new apartments since 2015, but most are designed for luxury. PORTLAND, Ore.  — It’s good news for renters — though perhaps a bittersweet moment for the landlords out there. The price of rent in Portland, Oregon has declined 2.7 percent on average over the last year, according to a report by... Read more ›

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Portland has added some 15,000 new apartments since 2015, but most are designed for luxury.

PORTLAND, Ore.  — It’s good news for renters — though perhaps a bittersweet moment for the landlords out there.

The price of rent in Portland, Oregon has declined 2.7 percent on average over the last year, according to a report by Zillow, the real estate website.

Zillow’s experts found declines in annual rental prices in more than half of the nation’s 35 largest markets, but the Rose City lead the way — with the biggest decrease between September 2017 and September 2018.

Seattle ranked second, with an annual decline of 2.2 percent.

“Rents remain high by historical standards, but September’s modest annual decline in rents should ease some of the pressure pushing higher-income renters to buy,” Zillow senior economist Aaron Terrazas said in the report.

For context, the median price of rent in America is now $1,440 a month, down about 0.2 percent since this time last year. That translates to a paltry $36 in annual savings, and Zillow says rents have actually increased by as 3 percent over 12 months in parts of California.

Portland and many other major cities have been inundated with a glut of luxury housing in the last few years, and local developers are reportedly sweetening their deals with Amazon giftcard giveaways and related gimmicks in order to lure wealthy customers.

There are about 15,000 more apartments in Portland now than when City Council first declared a housing “state of emergency” in 2015. Portland added just as many from 2010 to 2014, according to a City of Portland report.

As two freelance journalists recently put it: “Rents in Portland have fallen for the rich and risen for the poor.”

For full article info click here

Written by: Zane Sparling

Sunday, October 21, 2018

 

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