appfolio webinar: trulia's housing economist's top take-aways for 2015

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Don’t Go Into 2015 Empty-Handed


AppFolio

Complete Solution Includes:

Web-Based Property Management Software

• Property management and accounting

• Online rent collection (free)

• Prospect / guest card tracking

• Marketing

• Website

• Payment processing

• Online applications

• Resident Screening

So You Run A More Successful Business


Ralph B. McLaughlin, PhD

• Housing Economist, Trulia

• Former Professor at San Jose

State University

• Director of the Real Estate

Development Program

• Assistant Professor of Urban

and Regional Planning

• PhD in Planning Policy and

Design from UC Irvine


Polling Question

What am I most concerned with in 2015?

A. How to capitalize on pricing trends

B. How to adjust to changing demographics

C. How to deal with turnover and slowing mobility

D. How to manage evolving leads


2.

3.

4.

1. rental price trends

change in search behavior

turnover and mobility

evolving leads

5. top take-aways


rental price trends

How long will the price trends continue

to last?

1.


Polling Question

In your opinion, what do you envision happening in 2015?

A. Rents continue to rise to record-breaking levels

B. Rents increase slightly, but begin to flatten at the end of the year

C. Rents flatten and possibly decrease in certain metros

D. Rents begin to drop as home-buying picks up again


Rents on the move

MetroRents, year-over-year

United States (100-metro average) 6.2%

San Jose, CA 16.5%

San Francisco, CA 14.4%

Denver, CO 14.3%

Cape Coral-Fort Myers, FL 13.7%

Oakland, CA 13.3%

Long Island, NY 11.3%

Baton Rouge, LA 10.4%

Sacramento, CA 9.6%

North Port-Bradenton-Sarasota, FL 9.1%

Charleston, SC 9.0%


Most expensive rental markets

MetroMedian rent as share of average local wage

Miami, FL 61%

Los Angeles, CA 56%

New York, NY-NJ 55%

Oakland, CA 49%

San Francisco, CA 49%

Riverside-San Bernardino, CA 46%

Orange County, CA 46%

San Diego, CA 44%

Boston, MA 40%

Chicago, IL 37%


Rising rents

Why are rents on the rise?

• Increases in income: millennials are starting to get jobs againo 37% back to normal, up from 25% a year ago

• Increases in households: millennials are starting to move out of

their parent’s basemento % living with parents is starting to decrease

• Millenials are not buying homes….yeto Down payments hard to come by

o Low-down payment mortgages make buying a home more costly


Rising rents

Why are rents on the rise?: People are getting jobs

4

4.5

5

5.5

6

6.5

7

7.5

Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct.

Pe

rce

nt

Un

em

plo

yed

Unemployment Rate, Oct 2013 - Oct 2014

25 - 34 Year Olds

35 - 44 Year Olds

45 - 54 Year Olds


Why are rents on the rise?: Millennials are moving out

Rising rents

http://www.trulia.com/trends/2014/09/millennials-leaving-nest/


Millennial homeownership rate lowest in years

Why are rents on the rise?: Millennials not buying homes

http://www.trulia.com/trends/2014/09/millennials-leaving-nest/


Why are rents on the rise?: Down payment hard to save

Rising rents


Why are rents on the rise?: low-down payment loans are expensive

Rising rents

http://www.trulia.com/trends/2014/10/rent-vs-buy-q3-2014/


Renting vs. Buying

Across US, buying is cheaper than renting:

• For all of the 100 largest metro areas. Baseline assumption is:o 20% down payment

o Itemized tax deductions

o Stay in home for 7 years

• But: with 3.5% down, no itemizing, and moving in 5 years:

o Renting is less cheaper than buying in 20 of largest 100 metros

o Markets on the coasts become more expensive to buy

compared to renting

• Some of this difference is due to added expense of mortgage

insurance on FHA loans



Renting vs. Buying



What is happening on the supply side?

34% of new home starts 2014 YTD are multi-unit (5+ units). On track for highest annual multi-unit share since 1973.

93% of multi-unit home starts are intended for rent, not sale, 2014 YTD. On track for highest on record.


Time to be Conservative?

Donald Davidoff, President, D2 Demand Solutions

“Property managers are pressed to achieve higher

rental growth than the historical average. It’s been

a multi-year run, so I’m seeing some PMs be

conservative on their 2015 budgets wondering how

long this will really last.”

• Watch new construction in your area for pricing

trends

• Invest in technology and process

improvements

• Monitor supply-rich metros where over-supply

is driving increased vacancies


What does this mean for your business?

• Demand for rentals is solid:

• Millennials are getting jobs

• Millennials are forming new households

• Millennials are not buying homes yet

• New supply is increasing too: largest rental proportion of

multifamily units in years

• These factors are likely to sustain robust opportunity for

property investment/management sector

Opportunity in rental market growing


How are renters finding your

property?

search behavior2.


This is What Google Says

• 57% of users search for properties in their current city

• Average user searches for real estate 338 miles away from where

they are located

• Temperature seems to affect user propensity to move away from

home (smaller search radius in the south and southeast)


Your Audience is Changing

Asset-Lite Mentality

Mobile

traffic for

rentals is

growing

62% view

other

listings

during a

tour

83% of

millennials

sleep with

their phone


Get Mobile


Simple, Fast, Efficient, and Now

Chintan Pathak, CMO at Marketplace Homes

“We realized that millennials want things to be

simple, fast, efficient, and now. Outdated

marketing tactics of the 90’s no longer efficiently

work to get in front of the new age consumer.”

• Created an in-house communications

department to field phone calls and make out-

bound calls

• Developed a home concierge to help residents

get accustomed to their home and

neighborhood

• Moved the leasing process online



• Take advantage of online advertising, but don’t overlook local marketing (we’ll talk more about why in the next section, too)

• Remember curb appeal is just as important at web appeal

• Make consumers feel at home. Often they are beginners to the area or renting, in general

Don’t forget the neighborhood…


At what rate, and where, are people

moving?

Mobility3.


While the future is mobile, mobility is falling


While the future is mobile, mobility is falling

http://www.trulia.com/trends/2014/09/american-mobility-stuck/

0.1

0.12

0.14

0.16

0.18

0.2

0.22

0.24

0.26

0.28

0.3

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Pro

po

rtio

n M

ovi

ng

in P

revi

ou

s Ye

ar

Mobility Rate: Millennials vs. All Ages

Millennials

All Ages


Lower rates of moving to buy home, not rent



Within county mobility is highest



Metros with largest Millennial Growth

# Metro Pop growth, age 20-34

1 Colorado Springs, CO 3.2%

2 San Antonio, TX 3.0%

3 Peabody, MA 2.9%

4 Honolulu, HI 2.8%

5 Denver, CO 2.5%

6 Seattle, WA 2.5%

7 Cape Coral-Fort Myers, FL 2.5%

8 Houston, TX 2.4%

9 Oakland, CA 2.3%

10 Orlando, FL 2.3%


Higher occupancy overall

Mary Gwynn, CPM, President, Apartment Dynamics

“During 2014, we’ve seen move-outs decrease by 3% and

move-ins increase by 6% -- resulting in higher overall

occupancy. The impact has been decreased hard and soft

costs, higher occupancy and income, and higher renewal

rates with demand.”

• Although apartment turnover is much higher than the

census “everyone” stats, we still have to spend a lot

of time on moving new residents in

• Vacancies to increase slightly in certain “darling”

markets



• With a smaller percent of Americas moving, may need to turn

focus on maintaining current residents

• If rent increases outpace income growth, turnover could increase

• Lower mobility may create difficulties in filling vacancies

• Mobility amongst millennials is higher – catering to their needs via

technology and amenities could be key to filling vacancies

• Good news: people moving to buy, rather than rent, is down

• Could increase in future, as millennials enter the housing market

• Proportion of within county moves is relatively stable, but

proportion of between county moves has declined

• Posting vacancies/listings in local venues may yield more success

• But don’t ignore national listing services


Polling Question

What type of lead is most valuable to you?

A. Website or ILS lead

B. Craigslist

C. Phone call

D. Drive by


What type of leads are three times more

likely to lease at the property?

evolving leads4.


It’s a Numbers Game!

Leads that schedule an appointment are three times more likely to convert into paying tenants

• 6% of all leads convert

• 18% of all appointments scheduled convert

• It’s all about the appointment!

• Many landlords miss the opportunity to schedule appointments with residents


What’s in a lead?

Three characteristics of good leads…

informed

connected

confirmed


Prepare a Call Script

*77% of people that lease have called you first. (LTS)

1. Be proud of your property (company)

• “Good afternoon, Park Place Apartments (ABC Leasing). This is John, how can I help you?”

2. Get their name and use it

• Sure, I can help you with that, John. Where did you learn about our property?

3. Build upon their interest

• Great, I know what unit you are talking about. Why are you interested in that unit? Have you been by to visit the property before?

4. Once you’ve solved their concern, invite them to come by the property.

• Looks like this property might work well for you. I’ll be available at 5:00 today to show the unit. Will that work for you?


What are the top takeaways for 2015?

final takeaways5.


Top Takeaways

1. Monitor local pricing trends. Don’t be surprised if your rental price trends are flattening in 2015.

• Oncoming rental supply is largest on record

2. Take advantage of online advertising, but don’t overlook local marketing.

3. Mobility amongst millennials is higher – catering to their needs via technology and amenities could be key to filling vacancies.

4. Prepare a call script to help you optimize each lead opportunity.

Write them down…


Thank You For Joining Us!