RCG 17 Guide to Markets FINAL[1]

SECTION 1 | MARKET PERFORAMANCE Introduction The market rate multifamily industry emerged from the first leg of the late-cycle supply boom relatively unscathed. Occupancy declined marginally in 20<strong>17</strong>, but not enough <strong>to</strong> materially impact investment returns. Rent growth was moderately slower but gains were impressive nevertheless, particularly in the second half. And, net operating income growth was quite robust, supporting constructive asset appreciation and attractive portfolio investment returns. Overall, RED Capital Research’s (“RCR”) mathematically-derived forecasting equations proved highly reliable in projecting the rent and occupancy performance of the 49 metro markets (the “RED 49”) we econometrically model and forecast. Inputting actual supply figures in<strong>to</strong> the model, our group forecast for year-end 20<strong>17</strong> occupancy was within 0.1% of the realized result, and our effective rent growth forecast was essentially equal <strong>to</strong> the group’s 4Q<strong>17</strong> year-on-year advance. In this <strong>Guide</strong> <strong>to</strong> <strong>Markets</strong>, RCR seeks <strong>to</strong> refine its analysis and employ its statistically unbiased modeling techniques <strong>to</strong> the task of forecasting large metro performance and investment returns. We hope the results will prove beneficial for inves<strong>to</strong>rs seeking <strong>to</strong> navigate markets at this late stage of the current economic and real estate cycles. 7