pcbc multifamily trends conference
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www.sullivangroupadvisors.comPhone 858.523.1443
For: Multifamily Trends 2009
June 16, 2009
SULLIVAN GROUP REAL ESTATE ADVISORS
Peter Dennehy, Sr. Vice President
(858) 523-1443 x118
p.dennehy@sgrea.com
Multifamily Housing Market Outlook: Developer’s Guide to Surviving the
Downturn, Thriving on the Recovery
www.sullivangroupadvisors.comPhone 858.523.1443
The Current SituationWhere Are We Now?
www.sullivangroupadvisors.comPhone 858.523.1443
‘90-’91 Recession
‘81-’82 Recession
‘01 Recession
GDP Growth is Declining12/07-? R
ecession
-8%-6%-4%-2%0%2%4%6%8%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
1Q 2009 = -5.7%1Q 2009 = -5.7%
2009* using 1st qtr. dataSource: Bureau of Economic Analysis, released May 29, 2009; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
-800,000-700,000-600,000-500,000-400,000-300,000-200,000-100,000
0100,000200,000300,000400,000
Jan
-05
Mar
-05
May
-05
Jul-
05S
ep-0
5N
ov-
05Ja
n-0
6M
ar-0
6M
ay-0
6Ju
l-06
Sep
-06
No
v-06
Jan
-07
Mar
-07
May
-07
Jul-
07S
ep-0
7N
ov-
07Ja
n-0
8M
ar-0
8M
ay-0
8Ju
l-08
Sep
-08
No
v-08
Jan
-09
Mar
-09
May
-09
Source: Bureau of Labor Statistics (Non-Farm Employment, in Thousands); Sullivan Group
May 2009-345,000 Jobs
May 2009-345,000 Jobs
U.S. Lost Over 6 Million Jobs Since Jan. 2008
www.sullivangroupadvisors.comPhone 858.523.1443
81-82 Recession
90-91 Recession
2001 Recession
So Unemployment is Increasing
2009* – MaySource: Bureau of Labor Statistics; Sullivan Group
12/07-? Recession
3%4%5%6%7%8%9%
10%11%
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
Avg. 1980 to 2008 = 6.1% May 2009 = 9.4%
Avg. 1980 to 2008 = 6.1% May 2009 = 9.4%
www.sullivangroupadvisors.comPhone 858.523.1443
-3.00%
-3.40%
-3.50%
-4.00%
-4.10%
-4.10%
-4.20%
-4.40%
-4.80%
-4.80%
-5.90%
-6.80%
Salt Lake City
Seattle
San Diego
San Francisco
Los Angeles
Denver
Oakland
San Jose
Portland
Orange County
Las Vegas
Phoenix
All Western Metros Posting Negative Employment
Annual Change in Employment by Metro AreaApr ’08 vs Apr ’09 and 2009 Forecast
Source: Bureau of Labor Statistics; Marcus & Millichap; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
90-9
1 R
ece
ssion
200
1 R
ecession
12/0
7-? R
ecessio
n
81-8
2 R
ece
ssion
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2009* as of June 11Source: Freddie Mac; Sullivan Group
June 2009* = 5.59%
30-Year Fixed Rate Mortgages areHistorically Low
www.sullivangroupadvisors.comPhone 858.523.1443
0
20
40
60
80
100
120
140
160
88-2
89-2
90-2
91-2
92-2
93-2
94-2
95-2
96-2
97-2
98-2
99-2
00-2
01-2
02-2
03-2
04-2
05-2
06-2
07-2
08-2
09-2
U.S. Consumer Confidence is Low, But Improving
2Q09* = 54.92Q09* = 54.9
*2nd Qtr 2009 as of MaySource: The Conference Board, released May 26, 2009; Sullivan Group
3-Year rough patch
www.sullivangroupadvisors.comPhone 858.523.1443
0
200
400
600
800
1,000
1,200
1,400
19
65
19
67
19
69
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
Note: 2009 as of April Source: Census Bureau, released May 28, 2009; Sullivan Group
2005 = 1,283,000 Peak2008 = 485,0002009*= 352,000
2005 = 1,283,000 Peak2008 = 485,0002009*= 352,000
New Home Sales Continue to Fall:Lowest in Two Generations
Stole demand from future
www.sullivangroupadvisors.comPhone 858.523.1443
Western New Home Sales 78% Off Pace in 2005
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Ne
w H
om
e S
ale
s (
An
nu
aliz
ed
)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
Pri
ce
Sales (Ths) Median Price Average Price
New Home Sales, Median Price, and Average PriceWestern United States, 2000 - April 2009
2009 annualized using data through April.Source: National Association of Realtors; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Existing Condo Sales 43% Off Peak in 2005Prices at 2001 Level
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Ex
isti
ng
Co
nd
o/C
o-o
p S
ale
s
(An
nu
aliz
ed
)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Me
dia
n P
ric
e
Existing Condo/Co-op Sales Median Price
Existing Condo/Co-op Sales and Median PriceWestern United States
2009 annualized using data through April.Source: National Association of Realtors; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Big Pullback in Multifamily Construction to Lowest Level in Three Decades
12
6
29
5
35
938
4
38
9
36
6
34
6
34
1
33
5
32
9
35
1
35
6
31
0
29
0
27
1
24
1
16
0
13
815
2
26
3
34
0
38
642
1
58
4
65
7
61
7
57
0
36
6
31
936
6
0
100
200
300
400
500
600
700
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Multifamily Building Permits NSA, Ths. (5+ units per building)United States
2009 annualized using data through AprilSource: US Census Bureau; Sullivan Group
Historical Average = 355
www.sullivangroupadvisors.comPhone 858.523.1443
U.S. Home Prices DecliningPrices at 2003 Level
100
120
140
160
180
200
220
240
260
280
300
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Phoenix
Los Angeles
San Diego
San Francisco
Denver
Las Vegas
Portland
Seattle
Tracks changes I the value of the residential real estate market in 20 metropolitan regions across the US, collecting data on single-family home resales, capturing re-sold sale prices to form sale pairs.The Composite of 10 has a longer history than the Composite of 20 and includes: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, Washington DCSource: S&P/Case-Shiller released May 26, 2009; Sullivan Group
S&P/Case-Shiller Home Price IndexSelected Metropolitan Areas (Resales)
www.sullivangroupadvisors.comPhone 858.523.1443
Existing Condo Sales 56% Off Peak in 2005Price Declines are More Recent Phenomenon
300
400
500
600
700
800
900
1,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Ex
isti
ng
Co
nd
o/C
o-o
p S
ale
s
$100,000
$125,000
$150,000
$175,000
$200,000
$225,000
$250,000
$275,000
Me
dia
n P
ric
e
Sales (Ths) Median Price
Existing Condo/Co-op Sales and Median PriceUnited States, 2000-April 2009
2009 annualized using data through April.Source: National Association of Realtors; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Apartment Market Showing Increased Vacancy and Flat Rent (Overall)
$700
$750
$800
$850
$900
$950
$1,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Av
era
ge
Eff
ec
tiv
e R
en
t
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
Av
era
ge
Va
ca
nc
y R
ate
Effective Rent Vacancy Rate
Effective Rent and Vacancy RateUnited States, 2000-2009
2009 annualized using data through April.Source: Marcus & Millichap; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
12.80%
12.20%
8.90%
8.20%
7.90%
7.90%
7.80%
6.60%
6.60%
6.40%
5.90%
5.70%
5.60%
4.50%
4.30%
Tucson
Phoenix
Las Vegas
Denver
Sacramento
Salt Lake City
Inland Empire
Seattle
Portland
Oakland
Orange County
Los Angeles
San Jose
San Francisco
San Diego
Rent and Vacancy Trends Vary at Metro LevelForecasted Apartment Vacancy Rate2009
Source: Marcus & Millichap; Sullivan Group
National Avg. 7.7%
www.sullivangroupadvisors.comPhone 858.523.1443
3.52%
3.48%
2.90%
2.77%
2.65%
2.55%
2.52%
2.50%
2.27%
2.25%
0.31%
-0.23%
-1.25%
-1.31%
-1.41%
San Francisco
San Diego
Orange County
Oakland
Seattle
Portland
Denver
Los Angeles
San Jose
Salt Lake City
Sacramento
Las Vegas
Tucson
Inland Empire
Phoenix
Rent and Vacancy Trends Vary at Metro LevelForecasted Apartment Asking RentPercent Change 2008 vs. 2009
Source: Marcus & Millichap; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
-66%
-72%
-94%
-81%
-51%
-68%
101%
-54%
-62%
-75%
-60%
-46%
-55%
-55%
Seattle
Portland
San Jose
San Fran-Oakland
San Diego
Los Angeles-Orange
Salt Lake City
Las Vegas
Denver
Phoenix
PACIFIC
MOUNTAIN
WEST
UNITED STATES
Significant Slowdown in Multifamily Activity in Most Western Metro Areas
Annual Change in Multifamily Permits IssuedYTD April 2009 versus YTD April 2008
Source: NAHB; U.S. Census Bureau; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Looking Forward
www.sullivangroupadvisors.comPhone 858.523.1443
There is a New Wave Behind Boomers
Generation Born 2008 2007 % of Nation2007
Population
Eisenhowers Before 1946 62+ 17% 51M
Baby Boomers 1946 – 1964 43 – 62 27% 78M
Gen X 1965 – 1980 27 – 43 18% 52M
Gen Y(Echo/Millenials)
1981 – 1999 8 – 27 27% 80M
Gen Z 2000 and after 0 – 8 10% 30M
Source: Claritas, National Center for Health Statistics; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
If Gen Y Acts Like Previous Generations, Rental and High Density Are Good Bets
Source: Claritas, Inc.; National Center for Health Statistics; Sullivan Group
StudentHousing
Single &Roommate
Rental
Rent asCouple/
1st Home
YoungFamilyOwn
MatureFamilyOwn
EmptyNester
DownsizeOwn
RetireeSenior
Housing
2006 Gen Y Gen Y Gen X Gen XGen X,Baby B
Baby BEisen,Baby B
2010 Gen Y Gen Y Gen Y Gen XGen X,Baby B
Baby BEisen,Baby B
2015 Gen Y Gen Y Gen Y Gen Y Gen XGen X,Baby B
Eisen,Baby B
2020 Gen Z Gen Y Gen Y Gen YGen X,Gen Y
Gen X,Baby B
Eisen,Baby B
www.sullivangroupadvisors.comPhone 858.523.1443
Rental Housing Propensity by AgeRenters Dominate Under 35 Years
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Under25
25-34 35-44 45-54 55-59 60-64 65-74 75-84 85 andOver
% R
ente
rs b
y A
ge o
f Hou
seho
lder
Source: U.S. Census Bureau, 2006; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
62%
63%
64%
65%
66%
67%
68%
69%
70%
19
61
19
63
19
65
19
67
19
69
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
*
U.S. Homeownership Rate Linear (U.S. Homeownership Rate)
7.0% ARM interestRates in 2000
7.0% ARM interestRates in 2000
Mar 2009=67.3%
There are over 1 million homeowners moretoday than long-term trends would indicate
3.4% ARM interestRates in 2004
3.4% ARM interestRates in 2004
2009* as of MarchSource: Census Bureau; Sullivan Group
www.sullivangroupadvisors.comPhone 858.523.1443
Demographics are positive but, due to affordability, current and future growth will be dominated by renters
60%
61%
62%
63%
64%
65%
66%
67%
68%
69%
70%
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
Ho
meo
wn
ers
hip
Rat
e
20
22
24
26
28
30
32
34
36
38
40
Ren
ter
Ho
use
ho
lds,
Mil
.
Renter Households, Mil. U.S. Homeownership Rate
Source: U.S. Census Bureau: American Community Survey; Sullivan Group
Rental demand expanding after Decade of DeclineRental demand expanding after Decade of Decline
www.sullivangroupadvisors.comPhone 858.523.1443
Demographic Shifts Over The Next 10 Years Favor Multi-Family Development
1,300,000
170,000
1,500,009
4,100,000
5,400,000
5,000,000
3,500,000
-400,000
-1,900,000
-1,500,000
1,000,000
2,600,000
1,600,000
-200,000
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
Source: U.S. Census Bureau; RCLCO
Apartments and Condos:Single and RoommateRentals; Entry-Level andFirst Move-Up Condos
Apartments and Condos:Move-Down/DownsizingAnd Lifestyle Product
Senior Living
Projected Total Population Growth Rate by Age2008-2018
www.sullivangroupadvisors.comPhone 858.523.1443
For: Multifamily Trends 2009
June 16, 2009
SULLIVAN GROUP REAL ESTATE ADVISORS
Peter Dennehy, Sr. Vice President
(858) 523-1443 x118
p.dennehy@sgrea.com
Multifamily Housing Market Outlook: Developer’s Guide to Surviving the
Downturn, Thriving on the Recovery
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