Dupre + Scott Video Highlights: Apartment Demand & Investor Leverage

Dupre + Scott Weekly Video Update from www.duprescott.com

We love Dupre + Scott’s weekly video updates–they’re a quick, easy way to stay informed on all aspects of the apartment market. Today, we’ve got a quick recap of the latest videos for you, along with the videos themselves for your viewing pleasure. Enjoy!

August 2: A Guide to Apartment Demand

Today’s video focuses on vacancy rates and apartment demand–and how we can predict their ups and downs over the next few years. Here are Dupre + Scott’s main tips:

  • Look at employment, not unemployment. Remember, unemployment can go down for plenty of reasons that don’t signal a recovery–for instance, if people stop searching for jobs or leave town. For a more accurate indicator of apartment demand, look at employment rates.
  • Eight jobs translate into demand for one apartment. While this can vary slightly, it’s a safe and easily-calculated principle that can be used from county to county. If you read in the paper that Amazon is adding 1,000 jobs in King County, for example, you’ll know that there will be demand for an additional 125 apartments.
  • This ratio changes over time, for many reasons; in the early 90s, it was under eight, as “the tail end of the boomers entered the housing market,” while it hit almost 9.5 in the late 90s, because there were fewer people in their twenties.

Bottom line? When you hear news about the unemployment rate, look for the actual employment numbers–they’ll tell you what you need to know.

July 26: The double-edged sword of Leverage

Last Friday’s video was all about leverage–borrowing money in order to buy real estate. While most investors do need to borrow in order to purchase rental housing, borrowers must keep things in perspective:

  • Smart investors know a bit about lending history. In the early 80s, buyers put about 25% down. Mortgage rates were near 20%, but attractive terms in seller-financing made up for it–until seller-financing “all but disappeared” by the early 90s. While things were fairly tough for borrowers during the 90s, they eased up after 1999, when mortgage rates fell; but over the past ten years, investors have used less and less leverage.
  • When it comes to leverage, we have the two investment extremes: “Eat well,” and “sleep well.” The Eat Well strategy maximizes leverage, which means a great deal of potential for gains, but less security; meanwhile, the Sleep Well strategy keep leverage to the absolute minimum, which protects against future changes in the market.
  • Borrowers today are falling somewhere in between these two extremes–a smart move, according to Dupre+Scott. Down payments on apartment sales over the past few years have oscillated between about 28% and 36%, which means investors have worked to balance risks, reward, and safety.

The bottom line: Leverage is an important tool–as long as you keep your history in mind, and balance the risk and the reward.

 

 

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Dupre + Scott Video Highlights: Micro-Housing & Washington Immigrants

Dupre + Scott Weekly Video Update from www.duprescott.comHave you been keeping up with Dupre + Scott’s weekly video updates? They’re a great way to quickly access the latest rental market data–and today, we’ve got the most recent two videos, along with a quick summary of their major points. Enjoy!

July 5th: For today’s apartment dwellers, less is more.

This past Monday’s video covered the trends that Dupre + Scott have been seeing in apartments lately. Among their findings:

  • After getting bigger and bigger throughout the 1970s, 80s, and 90s, apartments are shrinking again. Innovations from the small apartments of the 1950s, such as Pullman kitchens, are being revived and revamped to fit today’s urban lifestyle.
  • While the driving factor of the trend for smaller apartments is no doubt apartment cost and vacancy, the change is made possible in part by the digital revolution we’ve experienced in the past few years–most of us no longer need lots of space for our televisions, music collections, or libraries.
  • Finally, the addition of communal spaces interspersed with micro-apartments has created vibrant neighborhoods that cater to the needs of young renters, replacing the old standard of larger living spaces to recreate in.

June 28th: For Gen Y-ers, it’s Northwest or Bust!

Did you know that 15,000 people moved into Washington State last month alone? Dupre + Scott’s last video in June investigated migration into the Puget Sound region, to find out who’s moving to our lovely state–and where they come from.

  • First of all, migration to our state, which dropped during the 1990s, is now on an upward trend again. In fact, there has been a 20% increase in the number of people moving to the Puget Sound region since 1999.
  • While more people move to Washington from California than from any other place, the numbers of people coming from the state have dropped, by about 10,000 per year. But immigration from Oregon, Texas, Arizona, Florida, and Nevada have more than filled that gap.
  • So who’s coming to Puget Sound? Of the 15,000 people who moved into the state last month, 9,640 of them moved into King, Pierce, Snohomish, Kitsap, or Thurston counties. Those numbers are courtesy of state driver’s license data.

 

The Numbers: Newer Apartment Sales in King County, 2000-2013

Today, we’ve got numbers brought to you by Dupre + Scott and their weekly video update. You can tune in and watch their video here; in the meantime, check out some highlights below.

The Numbers

All numbers this week pertain to the sale of apartments in King County with 5 or more units, built in or after the year 2000, and come directly from Dupre + Scott. Enjoy!

Average newer apartment sale prices in King County, 2000 and 2013

Highest sale price per unit for a newer apartment in King County in 2013 was $357,000

Cap rates are just under 4.5%, that's down from 8.5% in 2000.

 

Dupre + Scott Video Highlights: Bedroom Challenge

Have you been over to DupreScott.com lately? They’ve now got a Weekly Apartment Update video feature–published on Fridays, the videos are available right on their homepage, and they’re packed with all of the juicy data that makes Dupre + Scott such an invaluable resource for apartment data in our region.

This past Friday, their video covered The Bedroom Challenge–that is, what’s more appealing to the public in a rental unit: fewer bedrooms, or more? You can view their video right here on our blog; below, we’ve recapped some of the key data they released.

Key Facts:

  • In King, Pierce, and Snohomish counties, all types of apartments perform fairly similarly in their asking rents. Recessions cause rents to suffer uniformly, while periods of growth see the rents rising across the board. But there are subtle differences.
  • In King County, studio apartment rents have risen the most since 1997–4.3% compounded annually–with three-bedroom apartment rents rising a full percentage point less, and one- and two-bedroom apartments stair-stepping in between.
  • The same trend was found in Pierce and Snohomish counties, with some bigger variations, but the same basic concepts.
  • That percentage point translates to an increase of an extra 10% in rent growth over ten years.

There’s even more fun data in the video, but the conclusion is clear. We’ve got a winner, at least by a percentage point: it’s the studio apartment!