Percent Change - National Housing & Rehabilitation Association

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Percent Change - National Housing & Rehabilitation Association

National Housing & Rehabilitation Association’s2013 Annual Meeting“The Fiscal Cliff inContext: Economic andInvestment Perspective”John Chang-VP Research ServicesMarch 6-9 | Loews Miami Beach Hotel | Miami Beach, FL


Capital Gains Tax Moving TowardLong-Term NormGDP GrowthCapital Gains Tax Rate50%10%Capital Gains Tax Rate40%30%20%10%5%0%Y-O-Y GDP Growth Rate0%-5%* ForecastSources: Marcus & Millichap Research Services, Tax Policy Center, Federal Reserve


‣ $85 billion in automatic spending cuts start March 1‣ Spending cuts will slow economic growth; reduction toGDP in the 0.5 percent - 1.0 percent range‣ One million gov’t workers face temporary furloughs‣ Defense will be hardest hit: 8 percent reductions ($43B)‣ Biggest Challenges:Sequestration 2013• Blunt Instrument• Hits Wide Range of Popular Programs• Further Undermines Confidence – Induces Uncertainty


Uncertainty Index vs. Unemployment TrendsUncertainty IndexUnemployment24020010%Uncertainty Index16012080408%5%3%Unemployment Rate00%* Through JanuarySources: Marcus & Millichap Research Services, The Conference Board, BLS


Sequestration May Dampen Economic Growth10%Annualized Quarterly Change5%0%-5%-10%2000200220042006200820102012* ForecastSources: Marcus & Millichap Research Services, BEA, Blue Chip Economic Indicators


Annual Employment Change (millions)30-3-6Sequestration Raises Risks toU.S. Job Creation6 Sequestration Risk Total Employment* ForecastSources: Marcus & Millichap Research Services, BLS


U.S. Employment Gains Have Been BroadY-O-Y Sector Change Through January 2013U.S. Employment Sectors Absolute Change % ChangeProf. & Business Services 467,000 2.6%Trade, Transport & Utilities 443,000 1.7%Education & Health Services 429,000 2.1%Leisure & Hospitality 332,000 2.4%Manufacturing 109,000 0.9%Financial Activities 107,000 1.4%Construction 102,000 1.8%Other Services 61,000 1.1%Information 21,000 0.8%Natural Resources & Mining 19,000 2.3%Sources: Marcus && Millichap Research Services, BLS BLSTotal Gain 2,090,000Government -74,000 -0.3%Total Loss -74,000Net Change 2,016,000


Employment Change Rank by MetroY-O-Y Change Through December 2012Top 10MarketsAbsoluteEmp. GrowthPercentChangeBottom 10MarketsAbsoluteEmp. GrowthPercentChangeHouston 82,000 3.1%New York 75,600 2.0%Dallas-Ft. Worth 73,900 2.5%Los Angeles 61,600 1.6%Phoenix 51,600 3.0%Seattle-Tacoma 45,500 2.7%Boston 45,400 1.9%Atlanta 40,700 1.8%Chicago 36,200 0.8%Denver 35,500 2.9%U.S. Total 2,170,000 1.6%Miami -5,500 -0.5%Detroit -500 0.0%Palm Beach -300 -0.1%Milwaukee 1,700 0.2%Fort Lauderdale 2,900 0.4%Jacksonville 5,100 0.9%Portland 10,500 1.1%Sacramento 10,500 1.3%Indianapolis 10,700 1.2%Orange County 11,800 0.9%U.S. Total 2,170,000 1.6%Sources: Marcus & Millichap Research Services, BLS


U.S. Retail Sales Have Recovered FromDramatic Drop – Headwinds to Growth Remain20%Long-Term Total Retail Sales$300Monthly Retail Sales Excl. Auto and Gas$933/personYear-Over-Year Change15%10%5%0%-5%73778185899397-10%-15%Recessions01050913*Retail Sales ($ Bil.)+11%$270 $869/person$240$210$18001 03 05 07 09 11 13** Through JanuarySources: Marcus & Millichap Research Services, U.S. Census Bureau


Corporate Profits vs.Fixed Investment in Equipment and Software30%Corporate ProfitsFixed Investment in Equipment and Software$600Y-O-Y Change in Investment15%0%-15%$450$300$150Corporate Profits ($ Bil.)-30%$019992000200120022003200420052006200720082009201020112012** Through 3QSources: Marcus & Millichap Research Services, BEA


Major Corporations Build WarchestNonfinancial Corporate Business Liquid Assets$2.0Liquid Assets (Trillions)$1.5$1.0$0.5$0.0* Through 3QSources: Marcus & Millichap Research Services, Federal Reserve Board


Core Inflation vs. 10-Year Treasury4%Core InflationAvg. Core Inflation10-Year TreasuryAvg. 10-Year Treasury3.64%3%Rate2%1.90%1%40-Year AverageCore Inflation: 4.25%10-Year Treasury: 7.00%10-Year AverageCore Inflation: 1.90%0%10-Year Treasury: 3.64%2010201120122013** Through JanuarySources: Marcus & Millichap Research Services, Federal Reserve


Housing Contribution to GDPRecession*Post Recession**100%Average Historical Post Recession Gain: +37.4%Percent Change50%0%-50%-100%Average Historical Recessionary Loss: -14.6%1953-19541960-19611969-19701973-19751981-19821990-19912001Current* Recession periods: (2Q1953-2Q1954), (2Q1960-1Q1961), (4Q1969-4Q1970), (4Q1973-1Q1975), (3Q1981-4Q1982),(3Q1990-1Q1991), (1Q2001-4Q2001), (4Q2007-2Q2009)** Post recession defined by 14 quarters following the official end of the recession, or beginning of following recession in the event of overlapSources: Marcus & Millichap Research Services, BEA


Residential Investment as a Percent of GDP10%8%Percent of Total GDP6%4%2%0%19471953195919651971* Forecast4Q 2012 residential investment as a percent of GDP: 2.8%Sources: Marcus & Millichap Research Services, BEA1977198319891995200120072013*


U.S. Housing Completions2,500Single Family Apartment Condo Affordable HousingHousehold FormationNumber of Units (000s)2,0001,5001,0005000* Preliminary EstimateSources: Marcus & Millichap Research Services, U.S. Census Bureau


Single-Family Housing and Condo MarketImproving with Brighter OutlookMedian Home PricesExisting Home Sales$250Single-FamilyCondo650Single-Family and CondoMedian Price (000s)$225$200$175Y-O-YChange+13%+10%Home Sales (000s)550450350Y-O-YChange+9%$15020032004200520062007200820092010201120122013*25020032004200520062007200820092010201120122013** Through JanuarySources: Marcus & Millichap Research Services, National Association of Realtors


2020*U.S. Population 20-34 Years Old70The U.S. will add 1,730,800 20-34 Year Olds by 202066625820-34 Year Old Population (millions)541990199219941996199820002002200420062008201020122014*2016*2018** ForecastSources: Marcus & Millichap Research Services, U.S. Census Bureau


18-34 Year Old Population Living at Home24Living with Parents (millions)2220182011: 22,100,000Long-Term Average: 18,800,00016Note: Unmarried college students living in dormitories are counted as living in their parents homeSources: Marcus & Millichap Research Services, U.S. Census Bureau


Unemployment Rate by Age Group20-34 yrs 35-54 yrs 55+ yrs14%12%Unemployment Rate10%8%6%4%2%Sources: Marcus & Millichap Research Services, BLS


48Population in Poverty (millions)36U.S. Population in Poverty2424%18%1212%06%20110%2007Population in Poverty Poverty RatePoverty Rate195919631967197119751979198319871991199519992003Sources: Marcus & Millichap Research Services, U.S. Census Bureau


Quarterly Job Growthvs. Apartment Units Absorbed3.0Job GrowthNet Absorption400Job Growth (millions)1.50.0-1.52000-200Net Absorption (000s of Units)-3.0-400Sources: Marcus & Millichap Research Services, BLS, MPF Research


Apartment Market Improvement Expected toContinue; Recovery Pace Moderating250Completions Class A Vacancy Class B/C Vacancy12%Number of Units (000s)200150100509%6%3%Average Vacancy Rate00%* ForecastClass A: Properties built 2000+, Class B/C: Properties built pre-2000Sources: Marcus & Millichap Research Services, MPF


National Apartment Rank by Metro4Q 2012 Vacancy RateTop 10Metros4Q12VacancyYOY Bps.Chg.New York 2.5% -10Northern NJ 3.0% -80Oakland 3.0% -70Milwaukee 3.1% 10Miami 3.1% -70Minneapolis 3.2% 30Boston 3.4% 10San Diego 3.5% 30Los Angeles 3.7% -30Portland 3.7% -40U.S. Average 5.1% -20Bottom 10Metros4Q12VacancyYOY Bps.Chg.Las Vegas 9.1% 40Jacksonville 8.6% -190Indianapolis 8.4% 40Atlanta 7.6% -100Phoenix 7.6% -70Houston 7.5% -60St. Louis 7.1% -50San Antonio 6.8% -20Kansas City 6.6% 20Dallas-Ft. Worth 6.2% -40U.S. Average 5.1% -20Sources: Marcus & Millichap Research Services, MPF Research


National Apartment Rank by Metro4Q 2012 Rent GrowthTop 10Metros4Q 2012RentYOY %Chg.San Francisco $2,379 8.0%San Jose $1,917 7.7%Oakland $1,524 7.1%Denver/Boulder $999 5.9%Houston $868 4.8%Charlotte $830 4.6%New York $3,371 4.5%Portland $926 4.4%Seattle $1,101 4.3%West Palm Beach $1,146 4.0%U.S. Average $1,083 3.0%Bottom 10Metros4Q 2012RentYOY %Chg.Las Vegas $720 -1.7%Inland Empire $1,068 0.8%Atlanta $824 1.1%Indianapolis $714 1.3%Sacramento $964 1.4%Washington, D.C. $1,519 1.4%Milwaukee $898 1.5%Tampa $872 1.8%Minneapolis $981 1.9%Phoenix $753 2.0%U.S. Average $1,083 3.0%Sources: Marcus & Millichap Research Services, MPF Research


U.S. Apartment Investment TrendsAnnual Dollar Volume by Price Tranche$1M-$10M $10M-$20M $20M+$160Total Dollar Volume (Bil.)$120$80$40$000 01 02 03 04 05 06 07 08 09 10 11 12** EstimateIncludes sales $1 million and greaterExcludes $17.8B due to Archstone deal in Q407Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics


U.S. Apartment Price and Cap Rate Trends$125Average PriceCap Rates8%Average Price per Unit (000s)$100$75$50$257%6%5%4%Average Cap Rate20022003200420052006200720082009201020112012** Preliminary estimateIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.


Apartment Transaction Activity by Price Tranche150%$1M-$10M $10M-$20M $20M+Y-O-Y Percent Change100%50%0%-50%-100%* Preliminary estimateIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.


Apartment Pricing Trends by TrancheMedian $/Unit$150$1M-$10M $10M-$20M $20M+Median Price per Unit (000s)$125$100$75$50* Preliminary estimateIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics


Apartment Transaction Activity by Class150%Class AClass B/CY-O-Y Percent Change100%50%0%-50%-100%* Preliminary estimateIncludes sales $1 million and greaterAssumes properties less than 10 years old at time of sales to be Class A,properties older than 10 years assumed to be Class B/CSources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.


Average Cap Rate9%8%7%6%5%Apartment Cap Rates by ClassClass AClass B/CClass A Preferred Markets4%00 01 02 03 04 05 06 07 08 09 10 11 12** Preliminary estimateIncludes sales $1 million and greaterAssumes properties less than 10 years old at time of sales to be Class A,properties older than 10 years assumed to be Class B/CPreferred Markets Include: NY, DC, BOS, SD, LA, OC, SJ, SF, SEASources: Marcus & Millichap Research Services, CoStar Group, Inc.


Apartment Transaction Activity by Market Type60%Primary Secondary Tertiary PreferredY-O-Y Percentage Change30%0%-30%-60%* Preliminary estimateIncludes sales $1 million and greaterPreferred Markets Include: NY, DC, BOS, SD, LA, OC, SJ, SF, SEASources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.


Apartment Cap Rate Trends by Market Type9%Primary Secondary TertiaryAverage Cap Rate8%7%6%5%4%* Preliminary estimateIncludes sales $1,000,000 and greaterSources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.


Apartment Cap Rate TrendsAverage Cap Rates vs. 10-Year TreasuryApartment Cap Rate10-Year Treasury Rate10%Cap Rate Long-Term Avg.Average Rate8%6%4%2%380 bps390 bps10-Yr TreasuryLong-Term Avg.430 bps390 bps100 bps400 bps440 bps0%* Preliminary estimateIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics


National Housing & Rehabilitation Association’s2013 Annual Meeting“The Fiscal Cliff inContext: Economic andInvestment Perspective”John Chang-VP Research ServicesMarch 6-9 | Loews Miami Beach Hotel | Miami Beach, FL

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