116: Top 10 US Multifamily Metro Markets

SHOW NOTES FOR EPISODE 116: TOP 10 US MULTIFAMILY METRO MARKETS

In this episode, Bill presents at a recent study released by the National Multifamily Housing Council and the National Apartment Association.  The study looks at projected housing demand for the 50 top MSAs in the U.S.  Bill zeros in on the top 10 cities with the highest degree of multifamily opportunities.

A Report called “U.S. Apartment Demand – A Forward Look,” conducted by the NHMC (National Multifamily Housing Council) and the NAA (National Apartment Association) – Prepared by Hoyt Advisory Services, Dinn Focused Marketing, Inc. and Whitegate Real Estate Advisors, LLC – May 2017

U.S. Rental Demand At the national level, we first estimate total rental demand based upon total population, household size projections, and the portion of the market that desires and can afford ownership given the regulatory environment, interest rates and ease of credit access. The result is the net rental demand in households. We provide some notes on trends worth watching that might affect rental housing demand. We also provide some supply side discussion bringing in the impact of those marginal single family units that might be rentals or owner occupied. In brief, the national housing rental demand model is essentially the following:

1. Estimate total population growth considering births, deaths and net immigration.
2. Divide this by household size considering probable recessions and demographic trends
3. Equals total households (with a qualifier on homelessness)
4. Add to this the equilibrium vacant housing from market friction, normal vacancy and second+ home demand
5. Add to this the housing units lost to real depreciation and obsolescence including normal attrition for changes in use, public improvements, etc.
6. Equals total housing unit demand
7. Estimate the owner-occupied portion of this to derive renter demand, considering credit access, housing policies, existing household debt including student loans and credit debt, housing investment appeal and general affordability.
8. Allocate renter demand for new multifamily rentals of 5 units or more per building as defined by the NMHC.

RANKING CRITERIA  and DEFINITIONS:

METRO RANKING is the relative rank among 50 multifamily Metro markets based upon the average of HAS (Hoyt Advisory Services) forecasted total Metro multifamily demand 2017-2030 and its percent of current Metro rental households, ranging from 1 (Dallas-Fort Worth) to 50 (Cleveland).

AFFORDABILITY INDEX is the ratio of median family income to the minimum income to qualify for purchase of a single-family home at the median existing home resale price under standard mortgage underwriting today, then multiplied by 100 to convert to a 100 point index (e.g., an index of 100 indicates that the median family income equals the qualifying income). This index ranges from 69.4 (San Jose) to 290.7 (Cleveland) with a Metro average of 178.0

MF SUPPLY RESTRICTIONS is an HAS composite of the Wharton Residential Land Use Restrictions Index and the Lacroix percent of available Metro land not yet developed. This index ranges from 19.5 (Honolulu) to –6.0 (New Orleans) with a Metro average of 2.0.

STAR SHARE is that share of Metro rental housing stock with five or more units HAS qualified as *Second-Tier Affordable Rentals or those non-institutional sites of typically lower unit count, lower quality and greater age, a critical and ongoing multifamily supply component. Using CoStar® ratings of 1-5 for sites of five units or more, STAR is the lower ratings of 1-2. This share ranges from 61% (Los Angeles) to 17% (Austin) with a Metro average of 36%.

TOP 10 MARKETS

1. Dallas
2. Orlando
3. Miami
4. Houston
5. Phoenix
6. Austin
7. Atlanta
8. Raleigh
9. Las Vegas
10. Charlotte

Here is a link to the actual report if you would like additional details. https://www.weareapartments.org/NMHC-NAA-US-Apartment-Demand-in-2030.pdf

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