2008 August | MHN Blog

Fifteen Minutes into the Future by Kevin Henry

Aug 282008

“Good morning Kevin” comes a disembodied voice. “You’re up early today…did you sleep well?” “Just fine Kitchen…I have an early morning meeting at the office…so I’m in a hurry”. “Coffee or Cappuccino?” comes the voice…”Coffee” says I…”Cereal or eggs?” “Just toast this morning” I answer…”CNN or Sponge Bob” as the screen on the refrigerator comes to life…and so my day begins.

Science Fiction…no…just a glimpse of things to come…

In Italy your dishwasher may call you at work to let you know that it has sprang a leak…but not to worry, it has already informed the service company and they will be out between 9 and 12 on Tuesday.

In Norway you are caught behind a slow moving elk herd and will be 30 minutes late…so you call your oven to recalibrate the cooking time on your roast to be done at 8:30.

In Korea…the refrigerator has taken inventory and has placed an order for all pre-programmed items to be replenished automatically with an online grocery service. It has also ordered a few additional items that will be needed for tonight’s dinner party.

In Germany…the fully automated coffee machine can make your favorite cappuccino to your specific taste as well as all the other members of the family.

And in the US…cooking is as simple as 1..2..3 with your pre-programmed oven…you simply choose from the menu, fish, beef or fowl…punch in the weight, as well as the time you would like to serve and then just press “OK”…you are now a gourmet chef all with the single touch of your finger.

Networked appliances will be the next big thing to hit your kitchen…with “Bluetooth” technology slowly creeping into all of our home electronics…it will be just a matter of time before our kitchen becomes the central core to all home activities.

Appliances that think and plan-out menus, re-order and re-stock are already on the assembly lines. The next wave of microwaves will have a scanner to read the package of chili or popcorn and then preset itself for operation. The family calendar on the refrigerator will update everyone’s calendar, from Moms computer at work to sis’s cell phone to Dad’s PDA with all of today’s events, including soccer practice and dental appointments…It will remind Grandma to take her pills and Grandpa that he has a 6:30 Tee-Time.

As for the other appliances…as they are connected to the internet…they will receive electronic upgrades and they can self diagnose problems and download cures. Shortly your kitchen will read your personal electro-magnetic field when you enter the kitchen and begin to brew your favorite beverage and up-date your portfolio, all while you wait for your bagel to be toasted.

Eventually the kitchen itself will become one huge, computerized appliance that reads your lifestyle patterns, anticipates your needs for food, lighting, entertainment, and cleanup, and performs functions automatically — all without an explicit human command.

Whether this kitchen comes to pass, the modern kitchen will continue to be the heart, if not the hub, of the modern home, an essential element in our daily lives that touches and affects us both physically and emotionally, a place where we seek communion, rejuvenation, and sanctuary. Of all the items we will choose for our home, today’s kitchen will provide us with a unique outlet for creation and self-expression.

Kevin Henry is the Executive VP of NYLOFT, as well as writer, speaker and industry activist.

The Big Picture with Erin Brereton: The Science of Finding Your Own Ad Space Online

Miscellaneous No Responses »

Aug 262008

In July, the monthly total for consumers looking into specific apartment unit availability online hit–and passed–the one million mark for the very first time, according to Realty DataTrust’s VaultWare reservation system.

It’s no secret that online apartment searching is becoming more popular; given the current high gas prices–currently still above $3 a gallon–expect that trend to continue. People want to do as much research as they can online before heading out to personally view a property.

But as Realty DataTrust Vice President of Marketing Gina Kilker told MHN, checking availability online is just the start of the leasing process. It’s crucial you list your property on a site that will get it maximum exposure–in the right way, for the right price.

But how do you determine which site works best for your property and budget?

According to VaultWare, renters viewed five listing sites most often in July: Rent.com, Apartments.com, ApartmentGuide.com, ForRent.com and Move.com.

We took a look at the various sites’ listing policies to give you an idea of what each offers.

1. Rent.com –It’s free to list on Rent.com; the site charges a success fee of $389 per lease when it fills your vacancies.

Owners who manage fewer than 20 units can sign up for updates on Rent.com’s soon-to-be-released enhanced self-service platform. If you manage more than 20, you can contact the company about listing a large portfolio of properties on a permanent basis.

2. Apartments.com–Apartments.com also offers different deals for smaller-building owners and larger companies.

Premium Advertising Packages–available in platinum, gold and silver varieties–are designed for larger companies with ongoing ad needs. The Platinum package offers a wealth of community information, 360-degree views of units, priority listing placement in search results and a hard-copy version of your online ad that features color photos and community floorplans.

The other options offer slightly less features. For example, the Silver package includes interior and exterior building, amenity and common area photos only–and the For Rent By Owner package, designed to help smaller building owners reach more than 1.8 million renters, offers 30, 60 or 180 day packages with up to 20 photos.

3. ApartmentGuide.com –The site offers some interesting
enhancements, like online property commercials and a video spokesmodel
to represent your property in the listing.

For actual listing information–such as price or time duration–you’ll have to fill out a brief form with your contact and property information and be connected with an ApartmentGuide.com representative.

4. ForRent.com –With two advertising packages for small
communities–the Intermediate and the Deluxe listing, which cost $100
and $150–ForRent.com offers owners and managers a cost-efficient way
to reach renters. Both include photos (the Deluxe offers three; the
standard package includes one), a floorplan and general community
information.

Larger apartment communities can also list their property on ForRent.com. The packages for larger communities include photos, floor plans, maps and access to ForRent’s online Management Console, which provides 24/7 real time updates. Pricing is determined when you call or e-mail for a quote.

5. Move.com –You have to sign up for a Move.com account before
getting any information about how to list your property–but
registration is quick.

You have two basic options: One is the Showcase Listing, which the site says gives you the potential to receive up to 72 percent more clicks to your property detail page and is sold at a flexible monthly contract. The other is the Featured Listing, which gives you priority placement and allows you to pay only when your listing is clicked on.

Having an online presence is important–whichever site you choose to list your property on.

What factors were at play when you selected your online listing site?

What processes do you have in place to handle the leads being generated?

Erincolumnpic

“Capital Insights” with Jack Kern

"The Accidental Economist" with Jack Kern No Responses »

Aug 252008

Source: Bureau of Labor Statistics

Chart Title: CPI for 2008 Year To Date
Series Id: CUSR0000SA0
Seasonally Adjusted
Area: U.S. city average
Item: All items
Base Period: 1982-84=100

What’s A CPI Guy to Do?

You know, sometimes it’s hard to be positive when the government statistics come out. Witness the chart above that demonstrates how the CPI is now running at an annualized basis of 5.6%. You have to go all the way back to around 1991 before you see results like this. I sometimes hear economists talk about the so called core CPI, which is ex-food and energy, which works fine if you live in cave and hunt for your dinner in the woods, but for the rest of us, costs are soaring. I think there is an interesting dynamic here and I have a few points I’d like to share with you.

First, about 29% of the CPI has been calculated using what are faulty measures of rents and the imputed costs of a rental equivalence number, something that has been the subject of great debate in the economics community. As a result, the CPI measures have been more volatile than they should have been. Next, the CPI, contrary to some press accounts, is not a measure of the "cost of living," but rather a separate metric to track changes in a market basket of goods and services.

The upshot of this seems to have a very curious effect on renters. When an owner tells a renter that the rent is being raised at the end of the term by 6%, the renter frequently retorts, "but the CPI only went up 3%, that’s not fair." Apparently a lot of owners then end up agreeing to an inflation adjusted rent increase and everyone is happy. Now that we’re hitting soaring inflations, the opposite track might develop.

Renter incomes are not soaring along with inflation and the likely impact is that renters will only agree in most instances to increases that track their wage growth, usually less than 3%. Professional owners are going to feel the pressure on NOI. My guess is, in most parts of the country, we’re going to see sub-inflation rent growth except in some very dynamic places, and hopefully inflation will recede.

Between the issue of inflation and interest rates, the Fed has few tricks left in the Bernanke shopping bag. Let’s hope Ben figures this out

“Capital Insights” with Jack Kern

"The Accidental Economist" with Jack Kern No Responses »

Aug 192008

This is the first entry in what I hope will become a regular feature here in the markets section of Multi-Housing News Online. I’m going to be writing about Markets & Metrics, a special area near and dear to my professional heart. With the absolute proliferation of data and news releases coming out of lots of sources and the frequent misunderstandings that occur, I’m hoping to begin a dialogue with you, our readers and help point out some interesting facts, debunk some fictions and offer you some concise analysis. I hope you’ll come back often and contribute too! The success of any column is the relationship between you, our readers and our ability to deliver subject matter that interests you. I hope I’ll hear from you and you’ll share your insights and thoughts.

Now, onto our first topic.

Employment

The employment markets have been subject to lots of press coverage, along with speculation about what is really happening with unemployment rates and I’m pretty unhappy with what I’m reading. The fact that most reporters don’t understand how to read the numbers only makes the message worse. I’m also not a fan of the notion that employment drives apartment market rents, because fundamentally the total employment numbers reported don’t mean as much as the individual sector numbers that comprise them. To give you an example, in markets with lots of employment coming from construction, government and trade, the impact on apartment markets isn’t as significant as it is when you have jobs being generated in business and professional services, health care (which is actually a net negative, but we’ll cover that another day) and leisure and hospitality. For those willing to proffer that employment drives rents, let me remind you that we’ve had negative job growth most of this year, and still, many metros report rent increases and stable levels of traffic in the properties.

Have I got your interest? Next time, how do you measure employment and what are the three `main sources of data.

Until then, happy data crunching.

Eye on the Economy with Adam Perrotta

Miscellaneous No Responses »

Aug 182008

The nation’s economic picture has continued to look troubled as of late, with relief in oil prices being undercut by continued sharp downturns in employment and housing, as well as growing inflation.

The sluggish job market did see a slight uptick last week, as the number of workers filing for unemployment benefits fell slightly from a six-year high. According to the Department of Labor, 450,000 American workers filed initial unemployment claims during the week ending August 9th—down from 455,000 new claims during the previous week, and the first week-to-week drop in claims since early July.

The gains in employment, however, were tempered by more trouble elsewhere in the economy.

The annual inflation rate jumped to 5.6 percent in July, up from 5.0 percent in June and the highest reading in 17 years. Even with the recent easing of oil prices, the biggest driver of inflation remains the cost of energy; household fuel oil and gasoline prices jumped 61 percent and 38 percent, respectively, over last year. If oil prices continue their recent drop, though, inflation could temper. The Federal Reserve will no doubt be keeping an eye on the situation in the run-up to its interest rate meeting next month, and could be tempted to raise rates to prop up the dollar and moderate inflationary pressures.

Meanwhile, single-family home prices continue to plunge, according to a report released last week by the National Association of Realtors. The nation’s median single-family home price dropped 7.6 percent during the three months ending June 30th as compared to the same time last year. Foreclosures were mainly to blame for the decline, as banks sold off repossessed homes at bargain prices. The nation’s Sunbelt markets continued to be the hardest hit by foreclosures, with some metro areas in the West and South seeing as much as a 35 percent year-over-year price decline. In these markets existing home sales jumped as buyers took advantage of the low prices. Apartment owners in these markets could see a decline in rental demand as prices continue to fall.

In a Tight Market, Creative Marketing is Crucial

Miscellaneous No Responses »

Aug 142008

This week, MHN reported that New York-based residential firm Metro Loft Management will be waiving security deposits for renters with strong credit histories at its 20 Exchange Place building.

Condo and co-op sales have been strong in New York in the past year, despite a national housing slump.

The average condo price increased 36 percent from a year ago to $1,663,533, according to Halstead Property’s second quarter Manhattan sales report.

In some markets, strong home sales can weaken the rental market. That’s not the case in New York, however.

Yes, selling prices have remained fairly high through the housing slump. As prices fell throughout the rest of the country, the New York condo and co-op market stayed strong.

As standard single-family owners struggled to hold on to their declining equity–many of them discovering that they suddenly owed more on their home than it was worth–the New York market was so robust that buyers were eager to purchase luxury condos.

In fact, sales of units in two luxury developments–The Plaza and 15 Central Park West–alone pushed average Manhattan condo prices up.

Even without those numbers factored in, the average condo price would still be a respectable $1,656,210–which is 16 percent higher than 2007 levels.

The weak dollar attracted foreign buyers–which also helped fuel demand in New York. We can thank foreign investors, who the New York Times said "have helped keep apartment prices at stratospheric levels."

Yet, as the for-sale market increased, the rental market also remained highly competitive.

As of June, the Upper East Side showed the highest vacancy rate in Manhattan–which was just 1.45 percent. Overall, Manhattan’s vacancy rate was a scant 1.21 percent, according to Citi Habitats’ June rental market report.

It’s still expensive to buy a place in New York–$1,663,533, according to Halstead.

And, according to MSNBC, the average rent for a two-bedroom, unfurnished luxury apartment is $4,500 a month–which landed New York City the top spot on Forbes’ list of America’s most expensive cities.

Expensive rental markets can sometimes give the for-sale market a boost. Renters figure if they’re spending that much to rent, buying can’t be too much more.

The result: The rental market can falter.

That hasn’t happened yet in New York, however, which means rental property owners are still facing fierce competition to land renters. Which makes Metro Loft Management’s marketing idea a brilliant one.

A recent New York magazine article outlined how developers are decorating models to make it appear a very specific person lives there–one buyers might like to be–to help sell units.

Developers in the city are also marketing units with big bonuses like Gianni Versace SpA-designed luxury condos, which will be located in the clock tower of the former MetLife Inc. headquarters in Manhattan, Bloomberg reports.

According to a recent Canadian Press article, other residential builders are including resort-like amenities such as turndown service and pet sitting to make units more attractive.

In a tight market, creative marketing is crucial. What unique approaches have you seen recently in the multifamily industry?

Share your picks by posting below.

55+ Americans in Mexico: One Model Doesn’t Fit All

Miscellaneous 3 Responses »

Aug 112008

My mother has been living in Guadalajara, Mexico’s second largest city, for nine years. Family visits have provided an interesting glimpse into the 55+ expat demographic.

The Guadalajara area, including the lake-side towns of Chapala and Ajijic, have sizable and well-established American and Canadian communities. Other parts of Mexico are just as popular with retirees and new areas in Baja California and beyond are being discovered all the time—offering developers new opportunities to capture a growing market.

But besides knowing how to form partnerships with local players, developers also need to understand to whom they’re appealing.

Just as Mexico offers a range of climates and housing options—from edgy, minimalist high-rises to sprawling colonial-style villas—the Americans who settle here have tremendously varied budgets, tastes, and lifestyles.

And they don’t all share the same view of what it means to be an expat.

Some Northerners seek gated communities where more English is spoken than Spanish. Others, like my mother, prefer total immersion and would rather shop for groceries at the Mexican Walmart than at the local American grocery store that caters to English speakers. One of my mother’s Canadian buddies has converted his home to multi-housing which he rents out to locals. He has also opened up a modest eatery on the ground floor, providing ample opportunity to practice his already excellent Spanish.

It doesn’t get any more authentic than that.

Whatever their financial circumstances or willingness to assimilate, all Northerners arrive in Mexico expecting more bang for their buck in terms of housing, healthcare, and golf (or whatever they do for fun).

It will be interesting to see the effect of the economic downturn on their migration patterns—and on the housing market in Mexico. According to my mother, the bargains are no longer plentiful in her area.

But the downturn on both sides of the border may create new opportunities to be explored. Will Americans who were once eager to buy a home in Mexico now be willing to rent an apartment instead? What about assisted care facilities? My understanding is that many Mexico-based Americans feel they need to move back home for this last stage of life. It would be less disruptive to simply move to a different building in the same community.

A new trend that’s taking off in Mexico is the gated walkable community… like Loreto Bay, an 8,000-acre Baja California community on the Sea of Cortés. Developer Loreto Bay Company has teamed with several partners including Citigroup Property Investors, FONATUR, the Mexican government’s tourism agency, and Duany Plater-Zyberk & Company. The project is being marketed to Americans looking for authentic Baja architecture… but with the comforts of an American mixed-use environment. And it’s green.

American developers now have local competition with big clout. Mexico’s largest developer HOMEX has its eye on the affluent American and Canadian Baby Boomer market and has created a new HXM Tourism Division to aggressively pursue it. This summer it unveiled plans to build Las Villas de Mexico, an ambitious project that will eventually be rolled out to 22 locations with private communities offering condominiums, townhouses and villas for those with deep pockets.

The marketing campaign is emphasizing, among other things, security (manned stations at entry points and 24-hour front desk coverage) and conveniences such as medical service center, supermarket, banking, and concierge—who stocks your residence with groceries and other items that you’ve already specified—as your plane is landing in Mexico.

Communites will be built at both beach and city destinations and all will feature regional architecture. There will also be an optional exchange program for those who want to swap residences in order to experience more than one Mexican locale.

Does it get any better than this? Is it Mexican enough?
That really depends on who you ask.

No More Multifamily Fears About New Housing Law

Miscellaneous 5 Responses »

Aug 072008

Last week, the president signed a housing bill that gave the Treasury Department the authority to safeguard Fannie Mae and Freddie Mac and offered foreclosure prevention help for hundreds of thousands of homeowners.

Passed just a week ago by the House and sent to the president over the weekend by the Senate, the bill had been in the works for a long time.

Many members of the single-family industry hoped the new law, which includes a $7,500 buyer tax credit, would spur home sales.

But some multifamily industry members had expressed concern about parts of the bill–the tax credit in particular.

The National Multi Housing Council was against the $7,500 first-time homebuyer tax credit and questioned "using taxpayer dollars to encourage Americans to buy an asset that is likely to lose value in the coming months," Senior Vice President of Government for NMHC and the National Apartment Association Jim Arbury told the Philadelphia Business Journal.

Given that just last week the S&P/Case-Shiller index said home values are still falling–the index fell a record 16.9 percent in May compared to 2007 levels, and each of the 20 metropolitan regions had annual drops–that’s a fair assessment.

However, the tax credit isn’t so much of a concern anymore, according to the Business Journal, for a few reasons.

The credit’s income standards and repayment rules will reduce the amount of people who will use the credit. Those restrictions are considerable: The tax credit is $7,500 at most; if your adjusted gross income is more than $150,000 (or $75,000 if you’re single), the credit will be less.

If you financed the property with a state or local housing agency tax-exempt bond mortgage or don’t use it as your main residence, you also don’t qualify, according to the San Diego Union-Tribune.

And you’re not going to get a big check for the credit. It really works more as an interest-free loan, and buyers need to make pro-rata repayments on their annual tax filings for an up to 15-year period.

It’s also unclear how the law will affect single-family purchases because it eliminates seller-funded down payment programs for FHA-backed loans. According to The Wall Street Journal, they were used by as many as one in 10 buyers.

Down payment help programs make it easier for people to buy homes with no money down–given today’s tight economy, scraping together a decent down payment is no easy task.

But buyers who use FHA loans can’t take down payment assistance from the home seller (which is often funneled through a nonprofit group but really comes from a builder trying to sell a new home) starting in October.

And of course, there’s always the question of whether or not the lending industry will embrace the new law. Some builders already have embraced the new provisions. Pulte Homes, for one, is offering a matching discount to the $7,500 tax credit being offered to buyers to spur home sales, according to BusinessWeek.

But no one is sure how enthusiastic lenders will be.

The program is voluntary, and lenders who participate must agree to take a sizeable loss and shrink the principal of each loan before refinancing. Also, Dan Gorczycki, managing director, Savills Granite, told MHN that servicers will have to pay taxes on delinquent loans.

Smooth Selling

As a result, the law really doesn’t appear to pose any kind of threat to the multifamily market.

In fact, the National Multi Housing Council (NMHC) praised Congress for working to add liquidity to the federal tax credit program to help production of affordable rental housing through the Low Income Housing Tax Credit (LIHTC) program. The National Apartment Association (NAA) and the National Association of Home Builders (NAHB) also expressed support.

The NMHC also noted that the continuing problems in the single-family market will only increase need for multifamily housing–rental properties and also condos which, as we’ve previously reported, have retained their value much better than single-family units in the past year.

The council is also likely to be pleased with what the legislation may do for apartment developers; it increases low-income housing tax credits that have prompted the building and conservation of almost 2 million affordable rental housing units, according to Business Journal.

And, as Gorczycki says, even if the new law helps 400,000 people sidestep foreclosure, there could still be 6 million who can’t avoid losing their home.

The truth of that number is that those 6 million people will need new housing–and many will opt for rental units because they are unable or unwilling to obtain financing to buy again.

No one wants people to lose their homes. But we need to make sure we’re being realistic about giving them incentives to buy new ones–and that our industry is prepared for the influx of renters who are due to hit it.

Hopefully, the new housing law will help both multifamily and single-family. Do you think that it will?