Housing: Where The Action Is. Presented by: Mary Bujold Maxfield Research Inc.

Transcription

1 Housing: Where The Action Is Presented to: Sensible LandUseCoalition Presented by: Mary Bujold Maxfield Research Inc. February 26, 2014

2 Headlines 2013: Widespread Market Recovery Twin Cities Housing Market Hits 5 Year High Bankers, developers bet on apartments in Twin Cities Some students say luxury apartments are worth the price Twin Cities Housing Market Regaining gbalance Minneapolis apartment development booms, but not in the burbs Can Condos Mk Make a Comeback? Mini Apartments are the next big thing in U.S. Cities Number of Minnesota housing co ops surging ahead of Nation

3 Consumer Demand Drivers FOR SALE MARKET DECLINE DEMOGRAPHICS Displaced Millennialsi l homeowners Stricter underwriting standards High No. of foreclosures (less desirable) Baby boomers Lifestyle renters ECONOMY LIFESTYLE Positive job growth Unemployment rate declining Millennials leaving the nest Pent up demand Lifestyle renters Urban living Close to amenities

4 Forecast Growth The Metropolitan Council is currently revising its forecasts for 2040 based on adjusted growth trends and geographic distribution of growth Updated 2020 and 2030 forecasts will be released Spring 2014

5 Employment Twin Cities has consistently fared better than the US in its unemployment rate; current unemployment rate in the Metro is 4.3%.

6 Development Demand Drivers FAVORABLE FINANCING SENIOR & MULTIFAMILY LOW APT. VACANCY RATES MFf fundamentals top 25%Mt 2.5% Metro wide on the list Among lowest in US High capital flows into Pent up demand apartment sector LTV improvements LOW SINGLE FAMILY LOT SUPPLY Most of the 7 Metro Area counties currently have less than a three year supply of vacant developed lots PLAYING CATCH UP Very low construction during the Recession Current pent up demand primarily for single family, apartments

7 Building Permit Trends Residential Permits Issued reached their lowest point in 2009 Apartment development comprises the majority of multifamily Single family construction is resuming an upward trend

8 For Sale Inventories Single-Family New construction prices rising rapidly Resales have been strong reducing months of supply to less than the standard six Some sellers still waiting on the sidelines Absorption of new units has reduced lot supply across the Metro Multifamily Mulifamily pricing took a nosedive; values dropped by 40% to 50% in some cases during the Recession Builders focusing on singlefamily and limited townhome targeted to empty-nesters Increased affordability of single-family reduced demand for multifamily

9 Condominiums Condominium development (apartment-style) remains focused in only a couple of areas Downtown Minneapolis still has the largest supply New construction is being discussed, but will continue to experience challenges

10 Senior Housing Inventories The Twin Cities is a leader in senior housing offering a broad base of product to meet senior needs Some developers are pulling back for the short term due to slower growth among 75 to 84 age group (Depression Era babies) Distribution and Vacancy Rate by Product Type County Twin Cities Metro Area 6.6% Vac. 4.0% Vac. 7.1% Vac. 1.7% Vac. 10,477 Units 10,040 Units 6,012 Units 31%Vac 3.1% Vac. 3,710 Units 1,835 Units Adult Affordable Adult Market Rate Congregate Assisted Living Memory Care

11 Equilibrium Rents & Vacancies

12 Rental Units Online

13 U of M Student Housing Delivery

14 Northwest Qudrant For-Sale Demand is strong Demand for G. O. apartments Senior housing developed in some submarkets Employment expansion

15 Southwest Quadrant For-Sale demand is strong in most submarkets Land prices increasing rapidly Some apartment development occurring in fully-developed areas Senior housing is stable; g ; some demand but developers are cautious

16 Southeast Quadrant For-sale demand is strong in high growth submarkets Apartment development is weak in the face of growing demand Senior housing is generally Senior housing is generally stable, but absorption has slowed

17 Northeast Quadrant For-Sale demand is modest in most locations; Apartment demand is strong, but limited activity Senior housing demand Senior housing demand remains stable and there are some developments moving forward

18 Minneapolis St. Paul Apartment development will remain high; g; oversupply is likely in 18 to 24 months In-fill development, especially targeted along transit corridors Student housing development now repositioning to broader context.

19 2014 Trends For Sale Apartments Senior Housing Student Housing Construction Costs Land Prices Demand

20 Opportunities Challenges Outlook Outward to the suburbs Will employment growth Declining affordability in forsale market Buyer qualification still remain strong? Improving Job growth difficult Developers jumping in When will interest rates go before interest rates go up up? Pent up demand dcontinues Office sites repurposed in the short term Construction/labor costs Redevelopment and land prices continue to opportunities in urban and rise first tier suburbs When will supply exceed Lenders bullish on the demand? multifamily

21 Questions. Mary Bujold Maxfield Research Inc com/pag es/maxfield Research Inc/ linkedin mpany/maxfield research inc