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2017 National

Single-Family Rental
Research Report
To Our Valued Clients,

We are pleased to present our 2017 Single-Family Rental Report to help guide your successful real estate investment strategy this
year. In this report, we share the results of our extensive research on major markets, economic conditions, and other factors that
influence the balance of risk versus reward on single-family rentals across the country. Were condent that the right single-family
investment assets are available for you, regardless of your nancial goals.

Historically low interest rates in 2016 enabled investors to acquire cash-owing properties with leverage in metros across most of
the country despite the continued volatility in the stock market. Strong rental growth in many markets, combined with an ongoing
preference among the U.S. population for rental living pushed vacancies down, while appreciation outpaced ination.

The outlook remains positive for 2017, although rent growth in some major coastal markets will be subdued relative to last years
levels. Elsewhere, supply and demand for rental properties nationwide will result in another solid year for investors. The economic
recovery will continue to generate hundreds of thousands of new households this year, creating an unprecedented demand for
single-family rentals, especially as single-family construction levels remain tempered compared to boom periods.

The Fed will likely raise interest rates throughout the year in an effort to normalize monetary policy. By the end of 2017, we expect
interest rates to climb approximately 75 basis points, but remain relatively low. Inationary concerns that arose when the new
President took office will place upward pressure on 10-Year Treasuries. To take advantage of healthy conditions, we believe ac-
quiring properties during the rst half of the year would protect your existing portfolio and help build wealth over the long term.

Sincerely,

Stephen Hovland
Director of Research and Communications
Table of Contents

National Overviews
Single-Family Rankings4-5
National Economic Overview 6
National Single-Family Overview7
National Single-Family Investment Overview8
Capital Markets Overview 9
Local Overviews
Atlanta10
Austin 11
Boston ..........12
Charlotte .................................................................................................................................................................................................................... 13
Chicago 14
Cleveland 15
Columbia .....................................................................................................................................................................................................................16
Dallas/Fort Worth 17
Denver .........................................................................................................................................................................................................................18
Detroit. .........................................................................................................................................................................................................................19
Houston20
Indianapolis .............................................................................................................................................................................................................. 21
Inland Empire ........................................................................................................................................................................................................... 22
Jacksonville 23
Las Vegas 24
Los Angeles ............................................................................................................................................................................................................. 25
Memphis26
Miami ..........................................................................................................................................................................................................................27
Oakland28
Orange County..........................................................................................................................................................................................................29
Orlando ......................................................................................................................................................................................................................30
Phoenix ......................................................................................................................................................................................................................31
Portland ..................................................................................................................................................................................................................... 32
Raleigh-Durham 33
San Antonio .............................................................................................................................................................................................................. 34
San Diego ..................................................................................................................................................................................................................35
San Francisco ...........................................................................................................................................................................................................36
San Jose ....................................................................................................................................................................................................................37
Seattle ........................................................................................................................................................................................................................38
Tampa 39

Investor Information
Research Services and Investment Locations40
Contacts 41
Single-Family Rankings

Opportunity Ranking OPPORTUNITY RANKING


MSA Rank Markets in the Opportunity Ranking provide a strong balance
Atlanta 1
of supply/demand fundamentals while offering favorable
Orlando 2
Seattle 3 entry prices and limited threats. The metros highlighted in
Las Vegas 4 this ranking were measured using cap rates and entry prices,
Chicago 5 as well as projected job growth in 2017. Markets with high
San Diego 6 construction are penalized in the opportunity ranking due to
Oakland 7 elevated risk of competition.
Detroit 8
Dallas-Fort Worth 9 Two major metros in the Southeast earned top billing on this
Memphis 10 list: Atlanta and Orlando. Both metros continue to benefit
from strong job growth, and an exodus of retirees trading
cold-weather climates for warmer alternatives. Seattle, with
OPPORTUNITY MARKETS a booming, diverse economy fueled by Amazon and other
$550 4%
INVESTMENT PRICE JOB GROWTH FORECAST 2017
high-tech companies, placed third on this list. Rounding out
MEDIAN HOME PRICE (000S)

$425 3% the top five are Las Vegas and Chicago, metros that were
JOB GROWTH
latecomers to the economic recovery. Opportunities have also
$300 2% arisen for savvy investors in two California markets Oakland
and San Diego. While both metros feature high median
$175 1%
home prices relative to the other metros on this list, their
expanding economies ensure solid long-term appreciation
$50 0%
a
s
do ttle ega cago Diego land troit llas phi
s as prospects for strong rent growth remain intact. High rental
ant Orlan Sea as V i Oa
k De Da Mem
Atl L Ch San yields and low prices propelled Detroit and Memphis into
MARKET the top 10, while a well-rounded economy featuring a large
financial services presence enabled Dallas to secure a spot.

High-Demand Ranking
MSA Rank HIGH-DEMAND RANKING
Seattle 1 The Strongest Rental Demand Ranking looks at metros with
Oakland 2
the most favorable supply/demand forecasts regardless
San Diego 3
Orlando 4 of projected returns in 2017. These markets boast strong
Las Vegas 5 job growth, low vacancy, high projected rent gains and
Los Angeles 6 limited threat from renters purchasing high-priced homes.
Atlanta 7 Furthermore, the number of jobs per newly issued permit
Boston 8 is considered to serve as a hedge against the prospect of
Austin 9
overbuilding.
Raleigh 10
Major California port cities with growing infrastructure for the
trade, transportation and utilities sector, earned prominent
HIGH-DEMAND MARKETS mentions on this list. These metros Oakland, San Diego and
8%
2017 VACANCY FORECAST 2017 RENT GROWTH FORECAST 8% Los Angeles along with the top metro of Seattle have among
6%
the strongest job markets in the country, and the highest rent
6% growth forecasts this year. Increasingly out-of-reach prices
RENT GROWTH
VACANCY

4% for both investment and traditional homes has limited the


4%
buyer pool. Other supply-constrained markets earning top
2%
2%
spots in this years ranking include Boston and Austin. Thriving
hospitality and tourism sectors drive the rental markets of
0%
e o o as es ta n in h
0% Orlando and Las Vegas, while the mild climates of Atlanta and
attl kland Dieg rland Veg ngel Atlan osto Aust aleig
Se Oa San O Las os A B R Raleigh, N.C., are drawing renters of all ages to the Southeast.
L

MARKET

4
Single-Family Rankings

CAP RATE RANKING Cap Rate Ranking


Cap rates, or net operating income divided by price, historically MSA Rank
Cleveland 1
have been difficult to discern due to the prevalence of traditional
Columbia 2
home sales in the market. By utilizing prices of investment- Memphis 3
only properties, average rents for those assets, and consistent Philadelphia 4
operating costs, average cap rates can be derived for single- Atlanta 5
family rentals. For the second consecutive year, HomeUnion Chicago 6
has captured actual first-year returns, providing a clear view of Jacksonville 7
Tampa 8
the state of each metros investment market.
Charlotte 9
Stable markets occupy several spots in the Cap Rate ranking. Detroit 10
Some of the hardest-hit housing markets finally turned the
corner after the recession, earning spots in this ranking
after seven years of national economic expansion. The Rust HIGH-YIELD MARKETS
12% 20%
CAP RATE GROSS RENTAL YIELD
Belt cities of Cleveland and Detroit are prime examples,
while Philadelphia, Atlanta, Tampa and Jacksonville were

GROSS RENTAL YIELD


9% 15%

also once laggards to the recovery, but have overcome

CAP RATE
high foreclosure levels to emerge as strong markets for 6% 10%

yield-seeking buyers. The southeastern cities of Columbia,


3% 5%
Memphis and Charlotte appear in the ranking as well due
to low investment home prices. Perpetually insulated by
0% 0%
the fluctuations in pricing that impacts coastal markets, the and bia phis lphia lanta icago lle a e
nvi amp arlott etro
it
vel Colum Mem ilade At Ch ackso T h D
Midwestern city of Chicago earned a spot in the middle Cle P h J C

of this ranking as its employment sector rebounds, rental MARKET


growth remains stable, and home prices are still affordable.

Upside Potential Ranking


UPSIDE POTENTIAL RANKING MSA Rank
Although traditional home prices in many markets have nearly Chicago 1
Las Vegas 2
recaptured all of the value that evaporated during the housing
Orlando 3
downturn, some investment markets have been slower Miami 4
to recover for a number of reasons. By examining solely Fort Lauderdale 5
investment assets rather than all home sales, markets where Atlanta 6
more upside is present becomes clear. West Palm Beach 7
Philadelphia 8
More than half of the metros in this ranking were among the Phoenix 9
most overheated housing markets in the middle of the last Minneapolis 10
decade, which resulted in a larger climb for prices to recover.
Within this category are Las Vegas, Orlando, Miami, Fort
Lauderdale, Palm Beach and Phoenix. The local economies PRICING DISCOUNT FROM PEAK
$400
MEDIAN INVESTMENT PRICE (000S)

of many of these metros are outperforming the nation as a PRICE DECLINE 40%
DECLINE FROM PRIOR PEAK

whole, pushing valuations upward. Chicago, which tops this $300


30%
list for the second year in a row, was one of the last economies
to emerge from the recession, creating a longer timeline for $200
20%
prices to rise. Low entry prices for SFRs in the historically
stable eastern seaboard cities of Atlanta and Philadelphia $100
10%
make them attractive prospects for investors. In the near
term, continued low vacancy in Minneapolis, along with a $0
le ch ia lis 0%
go egas ando iami a
rda tlant Bea delph oenix eapo
ica V Orl M aude A
strengthening economy, will reward investors. Ch Las L P a lm Phila Ph Minn
Ft .
MARKET

5
National Economic Overview

GROSS DOMESTIC PRODUCT U.S. ECONOMIC GROWTH POISED TO CLIMB IN 2017


10 QUARTERLY CHANGE TRAILING 12-MONTH 6 AS JOBS AND CONSUMER SPENDING PROVIDE LIFT

TRAILING 12-MONTH AVERAGE


QUARTERLY CHANGE (SAAR)

The U.S. economy rides a wave of optimism into 2017, fueled


5 3
by the speculation that restrictions on business operations
will abate under a new Presidential administration. Even prior
0 0
to the election, the economy appeared to be on stronger
-5 -3
footing. In the second half of 2016, economic growth was
approximately triple the expansion recorded in the first six
-10 -6 months of the year. Many of the headwinds that stunted
93 97 01 05 09 13 17* development calmed during the final two quarters, including
*Forecast YEAR Brexit and concerns about economic growth in China. Oil
prices, meanwhile, stabilized as the supply glut began to
dissipate. As a result, job losses in the oil and gas extraction
EMPLOYMENT CHANGE VS. UNEMPLOYMENT
sector ceased at the beginning of the third quarter. Overall, the
EMPLOYMENT CHANGE (MILLIONS)

6 EMPLOYMENT CHANGE UNEMPLOYMENT RATE 10%


mining and logging sector lost more than 200,000 jobs from

UNEMPLOYMENT RATE
peak to trough, including nearly 30,000 oil and gas extraction
3 8%
positions. Unimpeded by the energy sector, the U.S. economy
0 6%
managed to add 2.2 million positions last year.

Several factors will contribute to stronger economic growth in


-3 4%
2017. Consumer confidence, a leading indicator of future retail
sales, reached a 15-year high at the end of 2016. Consumer
-6 2%
spending accounts for a significant share of GDP, which will
93 97 01 05 09 13 17*
help facilitate a 2.5 percent expansion in the economy this year.
*Forecast YEAR
Big ticket items, including those associated with household
formation, will make up a significant share of consumer
OIL PRICES AND JOBS spending. Many of these new households will be created by
20 OIL AND MINING JOBS OIL PRICES $150 millennials, who are making headway in the job market. Last
year, 11.2 percent of adults lived with their parents, the highest
12
PRICE PER BARREL

$120 rate since 1994. At the beginning of the most recent recession,
JOBS (OOOS)

4 only 10.1 percent of adults lived at home. Overall, 2.7 million


$90
more adults are living at home now than were historically.
-4

-12
$60 2017 ECONOMIC OUTLOOK
GDP is anticipated to grow 2.5 percent during in 2017. The
-20 $30
08 10 12 14 16
momentum gained in the second half of last year will help
the national economy expand at the fastest pace since 2015.
YEAR
Consumer spending related to household formation will be
one of the primary catalysts of a stronger economy.
MEDIAN HOME PRICE VS. CONSUMER CONFIDENCE
After slipping to 1.5 percent during 2016, payroll expansion
$225 MEDIAN HOME PRICE CONSUMER CONFIDENCE 125
is projected to rise to 1.7 percent this year. Employers are
MEDIAN HOME PRICE (000S)

CONSUMER CONFIDENCE

forecast to add 2.5 million jobs this year, led by professional


$200 100
and business services, and leisure and hospitality.
$175 75 Energy will move from being a drag on the economy to a
neutral position. After OPEC and Russia reached an output
$150 50 agreement, West Texas Intermediate crude oil prices are
forecast to hover between $50 and $70 per barrel, stemming
$125 25
the tide of job losses in the sector.
08 09 10 11 12 13 14 15 16
*Through 3Q 2016 YEAR

6
National Single-Family Overview

CLASS B AND C RENTALS POISED FOR A STRONG PERMITS


YEAR; NEW APARTMENTS PARE PERFORMANCE IN 1200 SINGLE-FAMILY MULTIFAMILY

CLASS A SECTOR
900
The national SFR market will remain healthy in 2017, though

UNITS (000S)
increased competition from a wave of new apartments will
600
slow the pace of improvement. Nonetheless, vacancy will
continue to tighten on a national basis, reaching the lowest 300
level of the current cycle. According to recent data available
from the U.S. Census Bureau, 805,000 households were 0
formed in 2016. Of those, 434,000 were renter households. 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Strong job growth will encourage new household formation, *Through 3Q YEAR
particularly among millennials that have been living with their
parents. As most of these new households are unlikely to
HOUSING STARTS
enter the ownership pool, this will create demand for rental
2500
properties. Additionally, higher home prices, limited inventory,
debt burdens and rising interest rates will limit the number 1875
of first-time homebuyers to approximately 35 percent of the
market, well below the long-term trend of 40 percent. 1250

As vacancy tightens, operators will be able to lift rents above


625
the inflationary rate this year. However, this trend will not
blanket the nation. Metros where high-paying jobs are met
0
with an influx of competitive, Class A apartments will likely see
80 84 88 92 96 00 04 08 12 16*
minimal rent gains in 2017. San Francisco, San Jose and Orange
*Through 3Q YEAR
County will fall into this category. Submarkets in Oakland,
Los Angeles, San Diego and New York will meet a similar
fate as landlords are forced to operate in a hypercompetitive HOMEOWNERSHIP RATE
environment. In less-expensive markets, where developers 72%

have minimized their presence and attrition to homeownership


69%
is unlikely, operators will have the strongest position to lift
rents. Metros in the Sun Belt, including the Florida, Carolina
66%
and Texas markets are expected to post above-average rent
gains. Overall, this is likely the last year for strong rent gains in
63%
the SFR market this cycle. Similarly, 2016 was the last year for
above-average rent gains in the apartment sector.
60%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16*
2017 SFR OUTLOOK
*Through 3Q YEAR
Housing starts will remain well below peak levels. Builders
are limiting activity due to low margins for entry-level homes
and high land costs. VACANCY & RENT
$2,000 SFR RENT VACANCY 12%
Vacancy will reach a cyclical low. SFR vacancy is projected
to decrease 30 basis points to 6.4 percent. Submarkets with $1,500
MONTHLY RENT

a high number of new apartments could see a rise in vacancy. 10%


VACANCY

$1,000
Competition will limit rent gains. Asking rent growth will slow
to 3.5 percent in 2017. Some of the markets with previously 8%
$500
strong performance are expected to show evidence of
plateauing rents this year.
$0 6%
09 10 11 12 13 14 15 16 17*
*Forecast YEAR

7
National Investment Overview

INVESTMENT SALES VELOCITY RETAIL BUYERS TAKE CHARGE AS DIVERSIFICATION


300 RETAIL INSTITUTIONAL DRIVES INVESTMENT ACTIVITY IN 2017
The SFR investment class remained attractive to buyers in
225
2016 as low interest rates and uncertainty in other investment
UNITS (000S)

vehicles encouraged diversification. Interest rates fell to a


150
cyclical trough during the midst of the spring buying season,
while concerns about the United Kingdoms vote to leave the
75
European Union erased billions in global equity within hours.
0
As the markets slowly recovered, investors realigned their
07 08 09 10 11 12 13 14 15 16* portfolios into real estate to take advantage of the low cost of
*Through 3Q 2016 YEAR
capital and stable returns. Moreover, investors wary of future
volatile swings in the global markets and facing pending
retirement transitioned to safety plays rather than relying on
INVESTMENT HOME PRICE TRENDS
enthusiasm in the stock market. Immediately following the
$200 MEDIAN HOME PRICE Y-O-Y CHANGE 20%
U.S. election, for example, stock futures plummeted. The
MEDIAN HOME PRICE (000S)

YEAR-OVER-YEAR CHANGE
turnaround in the equities markets was almost immediate
$150 10%
and resulted in a two-month rally. Although the stock market
$100 0%
recently reached an all-time high, concerns about the ongoing
strength of the current bull market pushed capital into rental
$50 -10% assets.

Most of the transactions last year were executed by retail


$0 -20%
buyers attempting to diversify their portfolios. The large
07 08 09 10 11 12 13 14 15 16*
institutions, which purchased thousands of homes during the
*Through 3Q 2016 YEAR
downturn, continued to reposition their holdings to maximize
efficiency. Additionally, institutions are profit-taking with
LEVERAGED VS. CASH PRICES some of their management-intensive assets, which were
$250 LEVERAGED SALES CASH SALES acquired at fire-sale prices. Investors purchasing properties
being discharged by the REITs and institutions may face
$200
similar management challenges in the coming months. The
investment market is expected to transition further this year
$150
as leveraged deals outnumber cash purchases for the first
time in a decade. Low interest rates, higher prices and the
$100
opportunity to amplify returns support this trend. Distressed
deals, which attract cash buyers, are also disappearing due to
$50
06 07 08 09 10 11 12 13 14 15 16
a stronger job market and appreciation.
*Through 3Q 2016 YEAR
2017 INVESTMENT OUTLOOK
Velocity will take a step back as institutions remain on the
LEVERAGED VS. CASH SALES sidelines. Buy-and-hold investors will be the dominant force in
80% LEVERAGED SALES CASH SALES
the market while flippers will find fewer deals.

65% Leveraged acquisitions are expected to surpass cash deals


for the first time since 2007. Cash purchases were very
50% attractive after the mortgage markets froze. Attractive rates
are luring investors willing to acquire assets with loans.
35%
Upward pressure on prices will continue. A shortage of
new supply will favor sellers in 2017, resulting in appreciating
20%
06 07 08 09 10 11 12 13 14 15 16* values in most places.
*Through 3Q 2016 YEAR

8
Capital Markets Overview

FED ACTIONS EXPECTED TO INCREASE CAPITAL FEDERAL FUNDS RATE VS. 30-YEAR MORTGAGE
COSTS FOR REAL ESTATE 8% FEDERAL FUNDS RATE 30-YEAR MORTGAGE

In 2016, investors enjoyed the lowest interest rates of the


6%
current cycle, approximately eight years after the Federal Open
Market Committee (FOMC) dropped the federal funds rate to
4%
the zero-bound. Although the Fed lifted the funds rate off
the floor in December of 2015, spooked investors rushed back 2%
into dollar-denominated assets in a flight to safety. Weakness
in emerging economies, in particular, sent a cascade of money 0%
into U.S. Treasuries. As a result, the 10-year rate dipped into 02 04 06 08 10 12 14 16
the mid-1 percent area, below the inflation rate for a period. YEAR
However, the markets regained their footing and consumer
confidence climbed, pulling up rates during the second half
10-YEAR TREASURY VS. CORE INFLATION
of the year. After the election, interest rates soared alongside
12% CORE INFLATION 10-YEAR TREASURY
the stock market. Part of that gain can be attributed to the
market moving ahead of the Feds December 2016 hike, the 8%
second such move in the current expansion cycle. Optimism
that moved capital from treasuries to equities contributed to 4%
the rest of the increase.
0%
Since the beginning of 2017, some of the optimism that fueled
the market has deflated, bringing treasuries back into the
-4%
mid-2 percent area. That level is consistent with the spread 00 02 04 06 08 10 12 14 16
between interest rates and the fed funds rate over the past
YEAR
three years. With the exception of last summers panic and
the late-2016 exuberance, treasuries have trended about 200
basis points above the funds rate. As the Fed resumes the 10-YEAR TREASURY VS. CAP RATE
cycle of federal funds hikes this year, upward pressure on 8% 10-YEAR TREASURY CONSTANT MATURITY CAP RATE

interest rates will persist. By year-end, the Fed is anticipated


6%
to lift the federal funds rate three times, or 75 basis points.
Those increases could push average cap rates for investment
4%
properties downward into the low- to mid-5 percent area by
the end of the year. When coupled with rising prices in most
2%
markets, the number of investment properties that pencil out
should decline this year. As a result, investors will need to
0%
perform greater due diligence. 06 07 08 09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR
2017 CAPITAL MARKETS OUTLOOK
The FOMC announced plans in December to lift the federal
funds rate three times in 2017. The forecast matches last AVERAGE CAP RATE FOR INVESTMENT SALES
8% CASH SALES LEVERAGED INVESTMENT SALES
years presumption before headwinds limited the interest-
setting body to a single increase.
6%
FOMC chair has no intention of stepping down. Chairperson
Janet Yellen has announced her intention of remaining in her 4%

post, providing some clarity into the direction of the committee.


2%
Rising interest rates will put downward pressure on high-
priced coastal home values. Although prices on the coasts
0%
could retreat, mid-priced homes will be further out of reach for 05 06 07 08 09 10 11 12 13 14 15 16*
first-time buyers in most places. *Through 3Q 2016 YEAR

9
ATLANTA Employment: 2.8% Vacancy: 120 bps Rents: 3.5%

EMPLOYMENT TRENDS ATLANTAS STRONG JOB GROWTH AND


6%
METRO US MANAGEABLE ENTRY PRICES ATTRACT INVESTORS
YEAR-OVER-YEAR CHANGE

The employment market in Atlanta is projected to outperform


3%
national levels in 2017. This year, 75,000 new positions are
expected, a 2.8 percent increase over the 70,000 spots
0%
created in 2016. Major sectors spurring the economy forward
include education and health services, as well as construction.
-3%
Another sector with a strong impact on the Atlanta economy
-6%
is the financial services sector. Insurance giant Anthem Inc.
09 10 11 12 13 14 15 16 17* will invest $20 million in a new software development center
*Forecast YEAR in Midtown. This project will create more than 2,000 jobs
over the next few years. Additional growth drivers include
consulting firm KPMG, which is in the process of creating a
PERMITS
new facility that will support 200 high-tech jobs, and Equifax,
32 SINGLE-FAMILY MULTIFAMILY
which is expanding its Midtown Atlanta headquarters. With the
addition of 1,300 new jobs, the Equifax project is expected to
24
have an economic impact of more than $75 million over the
UNITS (000S)

16
next five to ten years.

Demand from both traditional homebuyers and investors has


8 pushed up prices in the metro. For investment sales, much of
the increase has occurred in leveraged deals, where buyers
0
are seeking assets competitively priced with owner-occupied
08 09 10 11 12 13 14 15 16*
homes. Cap rates for these properties finished the year in the
*Annualized 3Q 2016 YEAR
high-7 percent range. All-cash deals, meanwhile, recorded
a more modest gain in median price as buyers chased yield
VACANCY & RENT into riskier neighborhoods. Overall, average cap rates for
$1,600 SFR RENT VACANCY 20% investment deals ticked higher during 2016 as rents outpaced
price growth, particularly in the lower quality tranches. This
$1,400 15% trend could continue in 2017 as rising interest rates ease
MONTHLY RENT

VACANCY

the pace of appreciation at a time when supply and demand


$1,200 10%
fundamentals favor landlords. As an investment market,
Atlanta still holds appeal for investors interested in moving up
$1,000 5%
the quality scale.

$800 0% MARKET OUTLOOK


09 10 11 12 13 14 15 16 17*
*Forecast YEAR
Employment: Job growth in Atlanta will outperform national
levels as new technology positions are created. By year end,
employers are expected to add 75,000 additional workers,
INVESTMENT HOME PRICE TRENDS an increase of 2.8 percent. Last year, payrolls climbed 2.7
$70 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
percent.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$65 12% Vacancy: SFR vacancy is forecast to end 2017 at 5.1 percent,
down 120 basis points annually.
$60 0%
Rent: Rent growth is forecast at 3.5 percent, leaving year-
end asking rents at $1,323 per month.
$55 -12%

Investment: Above-average job growth, declining vacancy,


$50 -24% attractive cap rates, and manageable entry prices will keep
09 10 11 12 13 14 15 16*
investment activity elevated in Atlanta.
*Through 3Q 2016 YEAR

10
AUSTIN Employment: 3.6% Vacancy: 80 bps Rents: 2.0%

TIES TO THE TECHNOLOGY SECTOR BUOYING JOB EMPLOYMENT TRENDS


GROWTH IN AUSTIN; INVESTORS UTILIZING LOW 6%
METRO US

INTEREST RATES IN LONG-TERM PLAYS

YEAR-OVER-YEAR CHANGE
3%
Austin employment continues to expand at a blistering pace,
with 36,000 new positions expected to be added in 2017,
0%
representing a 3.6 percent growth. The professional and
business services sector will fuel the local economy, led by
-3%
high-tech and Internet-based companies. Internet-based job
search engine Indeed plans to add 1,000 new jobs to the metro -6%
between now and 2019. Korea-based Samsung, meanwhile, 09 10 11 12 13 14 15 16 17*
has announced a $1 billion plan to expand its mobile chip *Forecast YEAR
division, resulting in 500 direct jobs beginning in early 2017,
while video game developer Certain Affinity will add 300 new
PERMITS
jobs to the market between the end of the year and 2020.
15 SINGLE-FAMILY MULTIFAMILY
Other growing employment sectors in Austin are information
and financial activities, and education and health services.

UNITS (000S)
10
Institutional buyers have largely exited the SFR market in
Austin, allowing retail investors a chance to reap the benefits
of this high-demand, growing market. Investors drawn to 5
this Texas metro are targeting properties desired by young
families in the technology and Internet space, while traditional
0
home buyers are facing higher home prices. Furthermore,
08 09 10 11 12 13 14 15 16*
Austin investment sales are growing while owner-occupied
*Annualized 3Q 2016 YEAR
sales are softening, as first-time buyers are being priced out of
the market. Cap rates in this market have remained at a steady
4.7 percent for the past two years. In markets like Austin where VACANCY & RENT
investment prices have increased, most investors have opted $1,900 SFR RENT VACANCY 20%

to use leverage.
$1,700 15%
MONTHLY RENT

MARKET OUTLOOK

VACANCY
Employment: Payroll levels are expected to expand to 3.6 $1,500 10%

percent this year as 36,000 positions are created. Much of


$1,300 5%
the growth will occur in the high-paying professional and
business services sector. In 2016, new hires contributed
$1,100 0%
23,0000 jobs to staffing levels. 09 10 11 12 13 14 15 16 17*

Vacancy: Vacancy is forecast to tighten 80 basis points to *Forecast YEAR

3.9 percent.

Rent: By year-end, asking rents are forecast to reach $1,735 INVESTMENT HOME PRICE TRENDS
per month, up 2.0 percent for the year. In 2016, SFR rents $150 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

jumped 3.9 percent.


$125 12%
Investment: With a strong technology sector, and an influx
of young talent, investors in Austin are beginning to move $100 0%

up the quality scale to target properties desirable for the


prime renter demographic. First-time buyers are priced out $75 -12%

of the market, creating an opportunity for investors utilizing


leverage while banking on appreciation. $50 -24%
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

11
BOSTON Employment: 2.1% Vacancy: 70 bps Rents: 2.9%

EMPLOYMENT TRENDS HIGH OCCUPANCY RATES ATTRACT SFR BUYERS


6%
METRO US TO BOSTON AS INVESTMENT SALES INCREASE
YEAR-OVER-YEAR CHANGE

Bostons economy continues to strengthen, pushing SFR rents


3%
higher and vacancies lower. Local employers are expected to
add 38,000 new jobs to the market this year. The financial
0%
services sector fueled the regions economic expansion in
2016. The high-tech sector also employs many of the areas
-3%
renters from millennials to generation X. In November,
-6%
Cambridge tech firm Akamai Technologies committed to the
09 10 11 12 13 14 15 16 17* largest lease transaction in the state of Massachusetts in the
*Forecast YEAR past three years: a 630,000-square-foot deal valued at nearly
$700 million in Kendall Square. SFR vacancy in Boston is
among the tightest in the nation, hovering just above 2 percent,
PERMITS
and rent growth of to 2.9 percent is expected by years end.
12 SINGLE-FAMILY MULTIFAMILY
Renter demand near Harvard, MIT, and other universities in
the Cambridge submarket will enable operators to push rents
9
above the metro average.
UNITS (000S)

6 As in most coastal markets across the country, investment


activity in the Boston metro presents challenges to all-cash
3 investors seeking high yields. However, the total volume of
investment sales is approximately 25 percent of total sales. As
0
buyers remain interested in the market, many resort to using
08 09 10 11 12 13 14 15 16*
leverage to acquire SFRs as prices continue to rise. Since
*Annualized 3Q 2016 YEAR
median investment prices have reached the $300,000 mark
and rent growth continues to slow, investors are readjusting
VACANCY & RENT their acquisition strategies. An increasing number of buyers
$2,500 SFR RENT VACANCY 8% are now targeting assets in suburban locations featuring higher
yields and cap rates above 5 percent. As appreciation triggers
$2,300 6% upward price growth, this trend is expected to continue in
MONTHLY RENT

VACANCY

2017, further limiting trades of in-town SFRs. While institutional


$2,100 4%
activity in most metros has slowed, investment activity by both
institutional and retail and buyers in Boston remains steady,
$1,900 2%
spurring competition for available SFRs.

$,1700 0% MARKET OUTLOOK


09 10 11 12 13 14 15 16 17*
*Forecast YEAR
Employment: After adding 34,000 jobs in 2016, employers
are anticipated to expand head counts by 38,000 spots this
year, representing a 2.1 percent increase.
INVESTMENT HOME PRICE TRENDS
$180 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
Vacancy: After a 60-point decline in 2016, vacancies for
single-family rentals are expected dropped by another 70
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$170 12% basis points to 2.1 percent this year.

$160 0%
Rent: Asking rents are expected to increase 2.9 percent to
$2,537 per month in 2017.
$150 -12% Investment: While both single- and multifamily vacancy rates
remain very tight, entry prices exceed $300,000, rendering
$140 -24% first-year returns inconsequential. Investors seeking higher
09 10 11 12 13 14 15 16*
yields are eschewing this metro in favor of markets with
*Through 3Q 2016 YEAR
stronger gains.
12
CHARLOTTE Employment: 2.5% Vacancy: 70 bps Rents: 3.8%

FINANCIAL SERVICES FIRMS EXPANDING THEIR EMPLOYMENT TRENDS


PRESENCE; KEEPING CONDITIONS FAVORABLE 6%
METRO US

YEAR-OVER-YEAR CHANGE
The Charlotte economy is poised to outperform the nation,
with the projected addition of 29,000 new jobs in 2017, 3%

representing an expansion of 2.5 percent. Leading growth


0%
sectors last year were financial services, leisure and hospitality,
and mining, logging, and construction. The financial services
-3%
sector in Charlotte continues to flourish, with two major
expansions by GoHealth, a health insurance technology
-6%
platform, and Lending Tree. GoHealth opened a new office in 09 10 11 12 13 14 15 16 17*
the University City submarket in 2016, and will hire for a total of *Forecast YEAR
600 positions by the end of 2017. Lending Tree, meanwhile, is
planning a $47 million infusion into the local economy that will
PERMITS
create at least 340 new jobs. While the manufacturing sector
12 SINGLE-FAMILY MULTIFAMILY
has declined over the past year, a number of manufacturing
companies have set their sights on the Queen City, bringing at
9
least 1,000 new jobs to the metro area.

UNITS (000S)
Cash buyers continue to favor Charlotte properties, with 67 6

percent of SFR sales closing without leverage. However, the


volume of investment sales has dropped, relative to national 3

levels, as institutions have reduced activity. Institutional


0
investment home sales significantly decreased, presenting
08 09 10 11 12 13 14 15 16*
individual investors with reduced competition and prime
*Annualized 3Q 2016 YEAR
opportunities to acquire available properties. In 2016, both
investors and traditional buyers moved into smaller properties
located in older neighborhoods due partially to a lack of VACANCY & RENT
new construction and higher prices. An anticipated increase $1,400 SFR RENT VACANCY 14%

in single-family construction in 2017 will start to reverse this


trend. While prices have climbed, cap rates remained steady $1,250 12%
MONTHLY RENT

VACANCY
at 7.1 percent due to higher rents, making Charlotte a strong
$1,100 10%
market for investors seeking above-average returns.

MARKET OUTLOOK $950 8%

Employment: Charlotte employment growth will outperform $800 6%


the nation this year. Employers are anticipated to add 09 10 11 12 13 14 15 16 17*
29,000 new positions by year end, lifting payrolls 2.5 *Forecast YEAR
percent. In 2016, 25,000 jobs were created.

Vacancy: Vacancy is projected to increase by 70 basis


INVESTMENT HOME PRICE TRENDS
points this year to 8.1 percent. Last year, vacancy ended the $90 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 20%
year at 7.4 percent
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Rents are forecast to grow 3.8 percent to $1,239 per $80 10%

month by the end of 2017.


$70 0%

Investment: Cash investors continue to dominate this market


and capture cap rates above 7 percent, while institutional $60 -10%

investors have moved to other markets. Traditional buyers


could be enticed by an influx of new homes in 2017, leaving $50 -20%
09 10 11 12 13 14 15 16*
opportunities for investors in older neighborhoods.
*Through 3Q 2016 YEAR

13
CHICAGO Employment: 1.2% Vacancy: 90 bps Rents: 1.9%

EMPLOYMENT TRENDS A DIVERSE ARRAY OF INVESTMENT PLAYS


6%
METRO US ATTRACT YIELD-SEEKING BUYERS TO WINDY CITY
YEAR-OVER-YEAR CHANGE

Chicagos economy will progress further this year as positive


3%
employment growth in a diverse array of industries persists.
Rents are expected to increase nearly 2 percent this year,
0%
supporting the 54,000 new jobs projected for the Windy City.
Some recent corporate expansions and relocations include
-3%
McDonalds, Echo Global Logistics, and Beam Suntory.
-6%
McDonalds broke ground on a new corporate HQ in the West
09 10 11 12 13 14 15 16 17* Loop late last year, and will bring 2,000 new jobs when its
*Forecast YEAR 600,000-square foot facility opens in mid-2018. Skokie-based
Echo Global Logistics will expand its Chicago operations by
adding 1,500 new employees in the coming years. Beam
PERMITS
Suntory, parent company of Jim Beam and Makers Mark plans
12 SINGLE-FAMILY MULTIFAMILY
to move to downtown from suburban Deerfield in an effort
to diversify its workforce by the end of 2017. Strengthening
9
renter demand will support rent growth.
UNITS (000S)

6 Rising investment sales prices have prompted some investors


to pull out of the Chicago market. Total investment activity
3 has declined year-over-year but the percentage of all-cash
sales still eclipses national levels, indicating that investors are
0
searching for immediate returns over banking on appreciation.
08 09 10 11 12 13 14 15 16*
Both traditional and investment buyers are targeting properties
*Annualized 3Q 2016 YEAR
higher up the quality scale, as the inventory of foreclosures
and distressed homes continues to dry up. A reduction in
VACANCY & RENT the number of buyers active in the market will create new
$1,800 SFR RENT VACANCY 16% opportunities for investors to take advantage of healthy
returns. In 2016, cap rates exceeded 7 percent, compared to
$1,600 12% 5.4 percent nationally. Rent growth should match appreciation,
MONTHLY RENT

VACANCY

keeping first-year returns relatively steady.


$1,400 8%

MARKET OUTLOOK
$1,200 4%
Employment: Chicago employment is expected to continue
its steady growth with an expansion of 1.2 percent over
$1,000 0%
09 10 11 12 13 14 15 16 17*
2016 levels. This year 54,000 new jobs are expected. Last
*Forecast
year, 48,000 new positions were added.
YEAR

Vacancy: Single-family rental vacancy across the metro


continues to decline. This year, it is expected to settle at 5.1
INVESTMENT HOME PRICE TRENDS
$140 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
percent. In 2016, levels were at 6.0 percent.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Rent growth in the Windy City is steady, with a


$125 12%
projected 1.9 percent increase of asking rents in 2017. Last
year, year-end rents were $1,586 per month.
$110 0%

Investment: With strong occupancy rates and solid rent


$95 -12% growth, investors in Chicago are achieving cap rates of
more than 7 percent. However, with less deals available,
$80 -24% and a high median sale price, investors are beginning leave
09 10 11 12 13 14 15 16*
the market. Those who remain are capitalizing on tenant
*Through 3Q 2016 YEAR
demand by moving up the quality scale.
14
CLEVELAND Employment: 1.1% Vacancy: 120 bps Rents: 1.5%

CLEVELAND SINGLE-FAMILY RENTAL PROPERTIES EMPLOYMENT TRENDS


REMAIN HIGHEST-YIELDING IN THE NATION 6%
METRO US

YEAR-OVER-YEAR CHANGE
A latecomer to the recovery, Northeast Ohios economy
continues to gain momentum as it transitions from a 3%

manufacturing-based economy to a diverse one, fueled


0%
by education and health services, as well as the leisure
and hospitality sector. In fact, Cleveland has earned the
-3%
moniker as the nations medical capital in recent years. The
economy grew 1 percent in 2016, with the addition of 11,000
-6%
jobs, while in 2017 employers plan to add 12,000 positions 09 10 11 12 13 14 15 16 17*
to the local economy, representing a five-year high. The *Forecast YEAR
leisure and hospitality sector expanded 4.6 percent, driven
by a ballot measure that legalized gambling in the Buckeye
PERMITS
State. Ohios casinos generated $800 million in revenue for
3 SINGLE-FAMILY MULTIFAMILY
schools, municipalities and counties in 2016, according to the
Ohio Casino Control Commission. Meanwhile, education and
health services expanded 3.8 percent in 2016, driven by the

UNITS (000S)
2

Cleveland Clinic and the University Hospitals system.

Low median prices for both investment properties and owner- 1


occupied properties make Cleveland one of the top markets
for yield-seeking investors. Median investment sales prices
0
rose 18 percent in 2016 to $74,500, well below the national
08 09 10 11 12 13 14 15 16*
average. As a result, cap rates remained in the double digits
*Annualized 3Q 2016 YEAR
last year at 10.9 percent, although below their 2015 peak
of 11.7 percent. Furthermore, only 21 percent of the housing
stock is utilized for investment purposes, which bodes well VACANCY & RENT
for investors looking for new opportunities. Meanwhile, $1,300 SFR RENT VACANCY 16%

median owner-occupied prices ended the year at 147,500. All-


cash investors dominate the housing market: 70 percent of $1,200 12%
MONTHLY RENT

VACANCY
the regions transactions were closed by these buyers. With
$1,100 8%
elevated yields, many suburban and in-city neighborhoods
remain attractive to SFR investors seeking strong cash flow in
$1,000 4%
lieu of appreciation.

MARKET OUTLOOK $900 0%


09 10 11 12 13 14 15 16 17*
Employment: Cleveland employment is expected to inch up *Forecast YEAR
1.1 percent in 2017 as 12,000 jobs are created. Last year,
11,000 new positions were added.
INVESTMENT HOME PRICE TRENDS
Vacancy: Vacancy for SFRs is tightening. This year, the rate $60 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 20%
is expected to end at 5.0 percent, down 120 basis points.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Asking rents for single-family rents are expected to $55 10%

grow to $1,210 per month, up 1.5 percent from last year.


$50 0%

Investment: The top-yielding market for investors, low entry


prices and rents above $1,200 characterize local investment $45 -10%

properties. The majority of investors use leverage to


increase their returns further. Despite strong occupancy $40 -20%
09 10 11 12 13 14 15 16*
rates, construction remains stunted in this market, allowing
*Through 3Q 2016 YEAR
investors the opportunity to push rents higher.
15
COLUMBIA Employment: 1.5% Vacancy: 260 bps Rents: 1.6%

EMPLOYMENT TRENDS LOW VACANCY AND HIGH CAP RATES ATTRACT


4%
METRO US CASH BUYERS TO SMALL COLUMBIA MARKET
YEAR-OVER-YEAR CHANGE

Job growth in Columbia will remain positive again this year.


3% Local employers plan to add 6,000 new positions in 2017,
representing growth of a 1.5 percent. A diverse economy,
2% fueled by the government, professional and business
services, and education and health services, will support
1%
renter demand. The regions manufacturing sector will
also expand in the coming years after Chinese fiberglass
0%
manufacturer, China Jushi, opens a $300 million facility hiring
10 11 12 13 14 15 16 17*
400 new employees by the end of 2018 when construction is
*Forecast YEAR
completed. The company announced plans to open a sister
plant nearby in 2021, hiring an additional 400 for that facility.
PERMITS
Within the Charlotte metro area, investors may want to focus
4 SINGLE-FAMILY MULTIFAMILY
on properties in the Central Columbia/University and Dutch
Fork submarkets due to high occupancy levels.
3
UNITS (000S)

With low single-family rental vacancy and prices, Columbia


2 remains a strong market for all-cash SFR investors, with more
than 70 percent of the regions buyers purchasing properties
1 outright. Additionally, SFR vacancies are expected to tighten
further, and drop by 260 basis points this year to a decade-low
0
2.3 percent. In 2016, investors began to move down the quality
10 11 12 13 14 15 16
scale, chasing available high-yielding inventory as prices
*Annualized 3Q 2016 YEAR climbed. However, cap rates remain well above the national
average in the Columbia region, eclipsing 9 percent over
VACANCY & RENT the past two years. With investment prices under $100,000,
$,1200 SFR RENT VACANCY 16% Columbia remains a desirable market with low barriers to entry
and strong potential for future growth. Relatively low barriers
$900 12% to homeownership, however, will prompt landlords to remain
MONTHLY RENT

VACANCY

conservative when raising rents, which should end the year at


$600 8%
$1,149 per month.

$300 4% MARKET OUTLOOK

$0 0%
Employment: After adding 6,500 jobs in 2016, employment
10 11 12 13 14 15 16 17*
growth has slowed slightly in Columbia. In 2017, 6,000 new
*Forecast
positions are forecast, representing a 1.5 percent growth for
YEAR
the year.

INVESTMENT HOME PRICE TRENDS


Vacancy: SFR vacancy is projected to drop by 260 basis
$70 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
points this year. In 2017, levels are expected to come in at
2.3 percent at years end. In 2016, they ended the year at
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$60 12% 4.8 percent.

$50 0%
Rent: Rents are anticipated to grow to $1,150 per month in
2017, up 1.6 percent from year-end last year.
$40 -12% Investment: Though Columbia has lower vacancy than the
national average and cap rates above 9 percent, investors
$30 -24% are seeking markets with stronger job growth and less
10 11 12 13 14 15 16
competition from traditional buyers.
*Through 3Q 2016 YEAR

16
DALLAS/FORT WORTH Employment: 2.9% Vacancy: 30 bps Rents: 3.5%

METROPLEX ECONOMIC ENGINE WILL EMPLOYMENT TRENDS


CREATE MOST NEW JOBS IN NATION 6%
METRO US

YEAR-OVER-YEAR CHANGE
A nearly 3 percent increase in jobs in 2017 is expected for
Dallas/Fort Worth as 105,000 new positions are created. 3%

Texas largest market should post positive employment


0%
growth across most sectors. Education and health services
will be a significant contributor to growth. For example,
-3%
Longview-based Everest Rehabilitation Hospital and the Plaza
Medical Center in Fort Worth are expanding. The latter is in
-6%
the midst of a $64 million expansion to its trauma services 09 10 11 12 13 14 15 16 17*
center, which will ultimately create an additional 130 positions, *Forecast YEAR
while the former will add another 120 jobs after the $10 million
expansion concludes. Other firms adding to payrolls include
GM Financial, which will add 1,300 jobs to Dallas/Fort Worth PERMITS
25 SINGLE-FAMILY MULTIFAMILY
between now and the end of the year, and AT&T, which is
investing in an urban live-work-play district that is expected to 20
employ at least 1,200 residents.

UNITS (000S)
15
As the foreclosure stock continues to dry up, institutional
investors are beginning to leave Dallas/Fort Worth. Sale prices 10

for both investment and traditional homes are up, though 5


investors are moving up the quality scale with leverage, while
traditional buyers are moving down. Both traditional and 0
08 09 10 11 12 13 14 15 16*
investment buyers are purchasing assets with a higher cost-
*Annualized 3Q 2016 YEAR
per-square-foot over the previous year, yet have a smaller
footprint. Single-family permits are up while multifamily
property permits are down as builders pause to enable the VACANCY & RENT
market to absorb the influx of new units that have come $1,800 SFR RENT VACANCY 16%
online. Cap rates in Dallas/Fort Worth have compressed 30
basis points to the mid-6 percent range. Additional downward $1,350 12%
MONTHLY RENT

pressure could be applied to cap rates, though significant

VACANCY
movement is unanticipated due to higher interest rates. $900 8%

MARKET OUTLOOK $450 4%

Employment: The Metroplex is expected to add 105,000


$0 0%
new jobs in 2017, representing a growth of 2.9 percent. In
09 10 11 12 13 14 15 16 17*
2016, employers added 106,000 positions.
*Forecast YEAR
Vacancy: In 2017, vacancy at SFRs is expected to drop to 30
basis points to 6.7 percent.
INVESTMENT HOME PRICE TRENDS
Rent: Asking rents for Dallas SFRs are expected to rise 3.5 $120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 16%
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

percent to $1,662 per month this year.


$100 8%
Investment: Unlike many investment markets, investors
in Dallas are moving up the quality scale, while traditional $80 0%
buyers are moving in the opposite direction. With strong
price growth, first-time buyers are being priced out of the $60 -8%

market, though stable job gains will keep those would-be


homeowners renting in similar neighborhoods. With cap $40 -16%

rates above 6 percent and strong fundamentals, investors 09 10 11 12 13 14 15 16*


*Through 3Q 2016
should reap short- and long-term gains. YEAR

17
DENVER Employment: 3.3% Vacancy: 30 bps Rents: 1.6%

EMPLOYMENT TRENDS SFR INVESTORS REDUCING PRESENCE IN THE


6%
METRO US
DENVER MARKET AS RENTS BEGIN TO PLATEAU;
YEAR-OVER-YEAR CHANGE

CAP RATES REMAIN COMPRESSED


3%
The robust rent growth enjoyed by Denver landlords over
the past few years appears to have flattened. As apartment
0%
developers bring thousands of units online this year, SFR
operators will limit rent hikes to compete for tenants. Absorption
-3%
will remain healthy as Denvers economic expansion creates
-6%
a projected 48,000 additional positions this year. In fact, job
09 10 11 12 13 14 15 16 17* growth in Denver will outstrip the level projected for the U.S.
*Forecast YEAR economy in 2017. Many of the regions jobs will come in the
trade, transportation and utilities; professional and business
services; and government sectors of the economy. For
PERMITS
example, at the end of 2016, BP announced plans to shift its
10 SINGLE-FAMILY MULTIFAMILY
focus to Denver, and will be moving their Lower-48 business
8 headquarters from Houston, hiring 200 new employees. This
UNITS (000S)

move marks a shift away from a single U.S. energy hub, with
6
the potential for more energy sector companies moving to the
4 Rocky Mountain region in the coming years.

2 As an investment market, Denver remains less popular than


other similar-sized markets and the presence of investors
0
continues to decline due to elevated prices. Despite this
08 09 10 11 12 13 14 15 16*
slowdown, the number of cash investment sales has increased
*Annualized 3Q 2016 YEAR
slightly in the past year, and the value of investment properties
continues to rise. Investors are forced to bring higher down
VACANCY & RENT payments to the table to bring cash flow up to levels where
$2,200 SFR RENT VACANCY 10% the properties are self sustaining. Traditional homebuyers in
the Mile High City, meanwhile, are moving into higher-quality
$1,650 8% neighborhoods. Rents have grown since last year, though the
MONTHLY RENT

VACANCY

pace of growth has failed to keep pace with appreciation.


$1,100 6%
Combined with persistently low cap rates, yield-seeking
investors will consider properties in other metro areas.
$550 4%

MARKET OUTLOOK
$0 2%
08 09 10 11 12 13 14 15 16 17* Employment: Payroll gains are anticipated to outperform
*Forecast YEAR
national levels as payrolls expand 3.3 percent. In 2017,
48,000 new jobs are forecast. Last year, the metro also
added 48,000 positions.
INVESTMENT HOME PRICE TRENDS
$250 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24% Vacancy: After a 20-basis point rise in 2016, vacancy at
single-family rentals is expected to dip 30 basis points to
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$200 16% 4.4 percent in 2017.

$150 8%
Rent: Single-family rents in this market are expected to inch
up to $2,097 per month, a 1.6 percent increase over 2016.
$100 0% Investment: Though this market has job growth that exceeds
national levels, investment prices are well over $300,000
$50 -8%
and cap rates linger just above 4 percent, encouraging
09 10 11 12 13 14 15 16*
investors to seek higher yields elsewhere.
*Through 3Q 2016 YEAR

18
DETROIT Employment: 2.1% Vacancy: 150 bps Rents: 2.7%

RECORD AUTO SALES SUPPORTING EMPLOYMENT TRENDS


RESURGENCE IN DETROITS ECONOMY 8%
METRO US

YEAR-OVER-YEAR CHANGE
A renaissance in Downtown Detroit will continue to bolster
the local economy in 2017. Last year, metro employers added 4%

13,000 new positions, representing growth of 1.8 percent but


0%
this year, the economy will grow 2.1 percent as 16,000 new
positions are created. The manufacturing sector, fueled by
-4%
the automotive industry, continues to support the recovery,
along with strong assists from other employment sectors. The
-8%
leisure and hospitality sector leads the economic expansion, 09 10 11 12 13 14 15 16 17*
followed by the professional and business services sector. *Forecast YEAR
To cater to millennials and educated middle-class workers,
developers were expected to bring between 1,200 and 1,400
PERMITS
multifamily units online in the heart of downtown last year.
8 SINGLE-FAMILY MULTIFAMILY
In addition, single-family permitting increased to meet the
growing demand among renters. For the first time in a decade,
6
Detroit vacancy will dip below 5 percent in 2017, making it a

UNITS (000S)
tight market by national standards. Rent growth remained in 4
the 4.0 to 4.5 percent range over the past two years, but will
slow to 2.7 percent by years end. 2

Investors have fueled the local housing market over the past
0
five years, creating a lack of for-sale inventory in the Detroit
08 09 10 11 12 13 14 15 16*
area. Single-family rental sales account for a significant share
*Annualized 3Q 2016 YEAR
of transactions in the market. As a result, owner-occupied
median home price and investment prices are virtually in lock
step. If buyers can find and procure single-family rentals in VACANCY & RENT
this market, they will benefit from low entry prices, relative to $1,200 SFR RENT VACANCY 18%

major coastal markets. The median investment home price


increased to $155,000 last year. Although cap rates declined $1,100 14%
MONTHLY RENT

VACANCY
70 basis points year-over-year since 2015, they remain high at
$1,000 10%
6.7 percent, presenting excellent upside potential for investors.
SFR investors in search of solid yields and strong renter
$900 6%
demand should capitalize on rapidly improving downtown
submarkets such as Midtown, East Riverfront and Corktown.
$800 2%
09 10 11 12 13 14 15 16 17*
MARKET OUTLOOK
*Forecast YEAR
Employment: Auto manufacturers will help create 16,000
jobs this year, lifting payrolls 2.1 percent.
INVESTMENT HOME PRICE TRENDS
Vacancy: Low construction levels should support a forecast $120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 21%
150 basis point decrease in vacancy to 4.3 percent.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Average rents are projected to rise 2.7 percent in 2017 $90 14%

to $1,113 per month.


$60 7%

Investment: After announcing billions in U.S. investments,


the auto industry is expected to whet the appetite of $30 0%

investors in the Motor City.


$0 -7%
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

19
HOUSTON Employment: 1.3% Vacancy: 130 bps Rents: -0.4%

EMPLOYMENT TRENDS LONG-TERM PROSPECTS FOR INVESTMENT


6%
METRO US
HOUSING GROWTH REMAIN STRONG IN THE
YEAR-OVER-YEAR CHANGE

HOUSTON MARKET
3%
While year-over-year growth does not outpace national
levels, the Houston employment sector is recovering, with
0%
the addition of 40,000 jobs, or 1.3 percent growth forecast for
-3%
2017. Employment dropped over the last few years due to the
instability of the energy sector, but it is expected to resume
-6%
an upward trajectory this year. Phillips 66 moved into its new
09 10 11 12 13 14 15 16 17* 1.1 million-square-foot headquarters located off Beltway 8 in
*Forecast YEAR Westchase. The Fortune 500 company took up occupancy of
two Class A office towers in mid-2016. Trade, transportation
and utilities, as well as professional and business services
PERMITS
are two other major employment sectors, with the former
40 SINGLE-FAMILY MULTIFAMILY
exhibiting a continued expansion. Vacancy will decline 130
30
basis points to 7.3 percent, a decade-low number for the
UNITS (000S)

metro, although rents will slide downward slightly as renters


20 continue to absorb high levels of new construction from 2016.

In recent years, investors in the Houston market have


10
moved down the quality scale, a trend echoed by traditional
homebuyers in the market. As the local economy recovers
0
from the energy sector-inflicted dip, it is likely that this trend will
08 09 10 11 12 13 14 15 16*
reverse, especially as new properties come online. Although
*Annualized 3Q 2016 YEAR
cap rates have trended downwards, they remain higher
than the national average, presenting out-of-state investors
VACANCY & RENT with opportunities to acquire properties with solid returns.
$1,600 SFR RENT VACANCY 20% Cap rates fell 40 basis points to 6.9 percent in 2016 as the
median investment home price appreciated to $162,900. With
$1,200 16%
the prospect of economic recovery on the horizon and less
MONTHLY RENT

VACANCY

competition among buyers for investment housing, Houston


$800 12%
remains a strong market for long-term growth. Investors
banking on this long-term growth may want to target suburban
$400 8%
locations such as Spring Branch and Katy, which will offer solid
long-term appreciation.
$0 4%
08 09 10 11 12 13 14 15 16 17*
MARKET OUTLOOK
*Forecast YEAR
Employment: Last year, the Houston metro added 9,000
new positions. This year, 40,000 jobs are projected,
INVESTMENT HOME PRICE TRENDS representing a 1.3 percent growth over last year.
$100 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 16%
Vacancy: Vacancy in Houston is expected to drop to 7.3
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$80 8% percent, down 130 basis points from 2016.

$60 0%
Rent: Rents are anticipated to decline slightly this year. Year-
end rents in 2017 are expected to be $1,591 per month. Last
$40 -8%
year, rents were $1,598 per month at the end of the year.

Investment: Though Houstons vacancy remains higher


$20 -16%
than other Texas markets, cap rates exceed national levels.
09 10 11 12 13 14 15 16*
As the economy recovers from the energy-sector downturn,
*Through 3Q 2016 YEAR
it is likely investors will return to this strong-yield market.
20
INDIANAPOLIS Employment: 0.9% Vacancy: 70 bps Rents: 2.0%

INDIANAPOLIS INVESTMENT MARKET EXPECTED EMPLOYMENT TRENDS


TO IMPROVE THIS YEAR AS HEALTHCARE FUELS 6%
METRO US

MODEST JOB GROWTH

YEAR-OVER-YEAR CHANGE
3%
In 2017, the employment market in Indianapolis is expected
to gain 9,000 jobs, a nearly 1 percent gain from last year.
0%
While solid, this represents a slight slowing of growth in this
metro, as approximately 14,200 jobs were created in 2016.
-3%
Nonetheless, trade transportation and utilities, education
and health services, and government continue to make up -6%
the largest sectors in the local economy. Among the notable 09 10 11 12 13 14 15 16 17*
expansions in the healthcare space, TriMedX, a healthcare *Forecast YEAR
technology company, is planning on adding 100 new jobs
to the region in the coming years following a $21.5 million
PERMITS
expansion. Meanwhile, Cook Group Inc., a Bloomington-based
8 SINGLE-FAMILY MULTIFAMILY
medical research firm which will infuse $16.5 million into its
business and hire 82 high-paying jobs in the next five years.
6
Other expansions include Pittsburgh-based GetGo Caf +

UNITS (000S)
Market adding 150 jobs in the metro; and student loan officer, 4
Sallie Mae, who will add nearly 300 jobs to the region by 2018.

The overall volume of investment sales is down as investors 2

are being pushed farther out into the suburbs to capture the
0
same high cap rates. At the same time, entry prices are below
08 09 10 11 12 13 14 15 16*
$100,000 and investors are split evenly between cash and
*Annualized 3Q 2016 YEAR
leveraged transactions. With declining vacancy rates market-
wide, healthy rent growth, and cap rates at nearly 8 percent,
Indianapolis presents an opportunity for investors with long VACANCY & RENT
investment horizons. A relatively modest pace of appreciation $1,200 SFR RENT VACANCY 16%

favors investors seeking monthly dividends in the form of rents


rather than briskly growing valuations. Reacting to growing $1,100 12%
MONTHLY RENT

VACANCY
demand for single-family properties, builders have pulled an
$1,000 8%
increased number of single-family permits over the last four
years. Nonetheless, renter demand has remained sufficient to
$900 4%
pull vacancy lower, benefiting local investors.

MARKET OUTLOOK $800 0%


09 10 11 12 13 14 15 16 17*
Employment: Job growth in Indianapolis has slowed since *Forecast YEAR
2016 when 14,200 new positions were added to the region.
By year-end, it is expected that an additional 9,000 new
openings will be created, representing a 0.9 percent growth. INVESTMENT HOME PRICE TRENDS
$80 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
Vacancy: SFR vacancy is forecast to end 2017 at 6.9 percent,
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

down 70 basis points from 2016. $70 16%

Rent: Rent growth is forecast at 2.0 percent, leaving year- $60 8%


end asking rents at $1,183 per month.

Investment: Strong rent growth and declining vacancy rates, $50 0%

combined with low entry prices and cap rates at nearly 8


percent will draw in investors looking for long-term gains. $40 -8%
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

21
INLAND EMPIRE Employment: 1.8% Vacancy: 70 bps Rents: 2.3%

EMPLOYMENT TRENDS STRONG ECONOMIC GROWTH GENERATES


6%
METRO US RENTER DEMAND; COMPARATIVELY LOW ENTRY
PRICES DRAW COASTAL INVESTORS
YEAR-OVER-YEAR CHANGE

3%
A diverse economy continues to bolster the Riverside-San
Bernardino rental market. In 2016, employers added 23,000
0%
jobs, marking growth of nearly 1.5 percent. Continued
expansion will occur across many sectors of the Inland
-3%
Empire economy in 2017, supporting the addition of 25,000
-6%
jobs. A federal training program called TechHire, designed to
09 10 11 12 13 14 15 16 17* bring more STEM jobs to the region, now includes Riverside.
*Forecast YEAR TechHire has committed 4,000 people to technology jobs over
the next five years in such industries such as data analytics,
healthcare IT, cyber-security and robotics. The warehouse
PERMITS
sector continues to improve, highlighted by a spate of recent
10 SINGLE-FAMILY MULTIFAMILY
real estate projects and leases. Builders brought nearly 10
8 million square feet of warehouse space online during the
second quarter of 2016. Amazon, QVC and UPS are among
UNITS (000S)

6
the firms that have commenced build-to-suit projects or inked
4 major leases for warehouse or distribution space in the region.

2 With low investment home prices and high cap rates relative
to other major California metros, the Riverside-San Bernardino
0
area remains one of the most attractive in the state for SFR
08 09 10 11 12 13 14 15 16*
investing. In fact, investment home price growth skyrocketed
*Annualized 3Q 2016 YEAR
10.8 percent in 2016, reaching $277,000, and cap rates
remained steady for the past three years, moving only 10
VACANCY & RENT basis points to 4.5 percent in 2016. An increase in multifamily
$1,800 SFR RENT VACANCY 12% construction will assist in moderating rents for both SFRs and
apartments. Rent growth in the Inland Empire soared over the
$1,350 10% past three years growing 8.6 percent in 2016 but will drop
MONTHLY RENT

VACANCY

down to more normalized levels in 2017.


$900 8%

MARKET OUTLOOK
$450 6%
Employment: This year, 25,000 jobs are projected to be
added, a gain of 1.8 percent. Last year, 23,000 new positions
$0 4%
09 10 11 12 13 14 15 16 17*
were created.
*Forecast YEAR Vacancy: Vacancy for single-family rentals is anticipated to
tighten by 70 basis points to 5.3 percent this year.
INVESTMENT HOME PRICE TRENDS Rent: A 2.3 percent year-over-year gain in rents is expected
$200 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24% in the Inland Empire. Average rents are anticipated to close
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

at $1,768 per month.


$150 18%
Investment: The Inland Empire remains one of the most
$100 12% affordable investment markets in California, drawing
investors from Orange and Los Angeles counties that prefer
$50 6% to manage their own assets. As prices climb and yields
remain relatively low, some of those investors will transition
$0 0% to out-of-state acquisitions.
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

22
JACKSONVILLE Employment: 3.4% Vacancy: 90 bps Rents: 2.0%

EMERGING JACKSONVILLE RENTAL MARKET EMPLOYMENT TRENDS


PRESENTS SOUND INVESTMENT OPPORTUNITIES 6%
METRO US

YEAR-OVER-YEAR CHANGE
The Jacksonville employment market will outpace average
3%
growth both nationally and across Florida. This year, 23,000
new jobs are projected, representing a 3.4 percent gain
0%
annually. Major sectors contributing the regions economic
strength include trade, transportation and utilities, business
-3%
and professional services, and leisure and hospitality. Amazon,
for example, announced plans to develop distribution and -6%
fulfillment centers that will create 2,700 jobs upon opening 09 10 11 12 13 14 15 16 17*
in late 2017. Human Resources software company Randrr is *Forecast YEAR
another presence expanding to Jacksonville. The startup
will invest $9 million to create 200 skilled positions over
PERMITS
the next two years, paying an average salary of $200,000.
8 SINGLE-FAMILY MULTIFAMILY
Median single-family rents are projected to grow 2 percent
over last year, while permits for single-family properties will
6
also increase to meet demand. Multifamily permit issuance

UNITS (000S)
has declined due to elevated levels of existing supply and an 4
increase in vacancy.

Overall sales volume for both traditional and investment sales 2

are down in Jacksonville, likely due to higher prices and a


0
smaller stock of distressed properties. On the investment
08 09 10 11 12 13 14 15 16*
side, prices for both cash and leveraged investment sales
*Annualized 3Q 2016 YEAR
have increased. Nonetheless, the percentage of investment
sales in this market continue to outpace national levels while
favoring smaller retail investors, as institutional buyers take a VACANCY & RENT
back seat. In recent months, investors have started to move $,1400 SFR RENT VACANCY 20%

up the quality scale into newer neighborhoods with assets


that have a larger footprint and price-per-square foot. With an $1,050 16%
MONTHLY RENT

VACANCY
uptick in single-family construction, investors may need to be
$700 12%
cautious of competing with the for-sale market.

MARKET OUTLOOK $350 8%

Employment: Employers in Jacksonville are hiring at a


$0 4%
robust pace, creating 23,000 positions, representing a 3.4 09 10 11 12 13 14 15 16 17*
percent gain. Last year, 25,000 jobs were created. *Forecast YEAR

Vacancy: Single-family operators should expect vacancy


levels to decline 90 basis points this year to 7.2 percent.
INVESTMENT HOME PRICE TRENDS
Rent: Marketwide rents are expected to end the year at $100 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$1,341, up 2.0 percent from the end of 2016. Last year,


$80 16%
average rents jumped 4.2 percent.

Investment: Above-average job growth and a steady $60 8%

increase in marketwide rents are drawing investors to this


Florida market. With vacancy rates projected to decline, $40 0%

and entry prices well below the national average, investors


seeking solid first-year returns are increasing their presence $20 -8%
09 10 11 12 13 14 15 16*
in Jacksonville.
*Through 3Q 2016 YEAR

23
LAS VEGAS Employment: 2.7% Vacancy: 150 bps Rents: 3.1%

EMPLOYMENT TRENDS HEALTHY GAMING INDUSTRY SUPPORTING


8%
METRO US NEW RENTER DEMAND IN LAS VEGAS
YEAR-OVER-YEAR CHANGE

With an economy driven primarily by tourism, the Las Vegas


4%
metro tends to have an above-average presence of renters.
The seasonal nature of employment in this sector often delays
0%
homeownership, creating rental demand, and making it a
-4%
perennial favorite of both retail and institutional single-family
rental investors alike. Current single-family rental vacancy rates
-8% for the market are relatively tight, though apartment vacancy
09 10 11 12 13 14 15 16 17* is high, and may tick up with the increase in new inventory
*Forecast YEAR coming online. Nonetheless, a projected 25,000 jobs are
expected to be added in 2017, up slightly from 2016 levels.
These positions and a resurgent gaming industry will support
PERMITS
12 SINGLE-FAMILY MULTIFAMILY
renter demand. Landlords can capitalize on above-average
demand by focusing on the South Las Vegas submarket.
9 Since the last housing boom, Las Vegas has consistently
UNITS (000S)

had a stronger-than-average investor presence. Typically,


6
lower priced homes, with a tight vacancy and the prospect of
appreciation have drawn single-family landlords to the metro.
3
However, over the past five years, volume of investor activity
has slowly begun to decline, as the deals that originally lured
0
many to the market dry up, and appreciation rates return to
08 09 10 11 12 13 14 15 16*
long-term levels. Cash investments in this market are also on
*Annualized 3Q 2016 YEAR
the decline, though still outstrip national levels. While 2014 and
2015 witnessed investors moving into older neighborhoods,
VACANCY & RENT in 2016 investors began moving back up the quality scale,
$1,600 SFR RENT VACANCY 15% into larger properties in newer neighborhoods. Cap rates in
this market remain near 5 percent. Institutional investors are
$1,200
beginning to cool on the market, as the available bulk supply
MONTHLY RENT

12%
VACANCY

deals have dried up.


$800 9%

MARKET OUTLOOK
$400 6%
Employment: Though late to the recovery, Las Vegas is
$0 3%
expected to add 25,000 new positions to the economy this
09 10 11 12 13 14 15 16 17* year. Last year, 20,000 jobs were created.
*Forecast YEAR Vacancy: Job growth should contribute to a decline in the
vacancy rate. By the end of the year, levels are expected
INVESTMENT HOME PRICE TRENDS to drop to 4.6 percent, down 150 basis points for the year.
$120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 30%
Rent: Operators in Las Vegas are expected to grow average
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

rents to $1,410 per month 2017, up 3.1 percent from 2016.


$100 15%

Investment: Investment volume in Las Vegas was strong


$80 0% during the recovery, however investors are beginning to
move away from this market as inventory levels decline and
$60 -15% distressed deals are difficult to find. Those who remain in
this market are focused on the South Las Vegas submarket
$40 -30%
where vacancy levels are especially low.
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

24
LOS ANGELES Employment: 2.1% Vacancy: 10 bps Rents: 3.8%

BOOMING ECONOMY, HOUSING MARKET SUPPORT EMPLOYMENT TRENDS


APPRECIATION OPPORTUNITIES IN L.A. 6%
METRO US

YEAR-OVER-YEAR CHANGE
Employment conditions in L.A. County remain among the
3%
strongest in the state. Job growth will expand 2.1 percent in
2017, with the addition of 90,000 new jobs. The largest sector
0%
trade, transportation and utilities will keep growing this
year to bolster the Port of Long Beachs labor requirements
-3%
and other infrastructure projects. Phase one of the $1.3
billion Middle Harbor Terminal wrapped up in late 2015. Upon -6%
completion in 2019, the port will be redeveloped into the 09 10 11 12 13 14 15 16 17*
greenest, most technologically advanced container terminal *Forecast YEAR
in the world. Another major project rising in L.A. is the Los
Angeles Stadium and Entertainment District at Hollywood Park
PERMITS
in Inglewood. In 2019, the stadium will house the L.A. Rams
20 SINGLE-FAMILY MULTIFAMILY
and L.A. Chargers, and give the city greater leverage in its bid
for the 2024 Olympics. L.A. rent growth soared 6.6 percent
15
year-over-year in 2016 to $2,550 per month, and will continue

UNITS (000S)
to grow in 2017, although not as frenetically. Vacancies will 10
tighten 10 basis points in 2017 to a decade-low 2.9 percent.

As L.A.s housing market remains heated, median SFR prices 5

edged closer to owner-occupied home prices: SFRs traded for


0
$530,000 in 2016, while owner-occupied assets commanded
08 09 10 11 12 13 14 15 16*
$560,000. Investment home cap rates, meanwhile, continued
*Annualized 3Q 2016 YEAR
their downward trajectory, dropping 30 basis points from
2015 to 3.5 percent, limiting Los Angeles a market for
investors seeking appreciation. Since the number of retail VACANCY & RENT
and institutional buyers dropped on an annual basis in 2016, $3,000 SFR RENT VACANCY 8%

this year could signal an opportune time to enter the market.


In addition to Inglewood, investors should target the West $2,500 6%
MONTHLY RENT

VACANCY
Adams and Jefferson Park neighborhoods, also located in
$2,000 4%
south central L.A., for SFR yields. Meanwhile, Highland Park,
Glassel Park, and Montecito Heights in northeast L.A. provide
$1,500 2%
investors with solid opportunities for appreciation.

MARKET OUTLOOK $1,000 0%


09 10 11 12 13 14 15 16 17*
Employment: Employment growth is robust. This year, *Forecast YEAR
90,000 positions are expected, a 2.1 percent increase.

Vacancy: One of the tightest markets in the country, Los INVESTMENT HOME PRICE TRENDS
Angeles vacancy is anticipated to drop to 2.9 percent, $400 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 30%
down 10 basis points from last year.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Single-family home rents in the Los Angeles metro are $300 20%

expected to grow to $2,644 per month. This represents a


$200 10%
3.8 percent year-over-year increase from 2016 rents.

Investment: The Los Angeles economy is booming, however $100 0%

investment levels remain low, due to high entry costs. This


market does provide strong projected growth through $0 -10%
09 10 11 12 13 14 15 16*
appreciation, and appeals to investors who are willing to
*Through 3Q 2016 YEAR
take a hit now for long-term gains.
25
MEMPHIS Employment: 1.3% Vacancy: 300 bps Rents: 1.8%

EMPLOYMENT TRENDS INVESTMENT OPPORTUNITIES ABOUND FOR


6%
METRO US BUYERS AS MEMPHIS JOB CONDITIONS IMPROVE
YEAR-OVER-YEAR CHANGE

Memphis employment growth will remain steady, with 8,000


3%
new jobs expected 2017. The region is becoming a hub for
medical device manufacturers. The Greater Memphis Alliance
0%
for a Competitive Workforce is working towards that aim, with
a goal of filling over 800 high-paying jobs. Another notable
-3%
expansion includes the multifamily management company
-6%
MAA, which is moving its headquarters to the Germantown
09 10 11 12 13 14 15 16 17* submarket, where it will create more than 200 jobs with
*Forecast YEAR average salaries of $85,000. Rents are continuing on their
upward trajectory, while builders have pulled back on permits
for single-family homes until the existing stock is absorbed.
PERMITS
Multifamily permits have grown, however it will be some time
4 SINGLE-FAMILY MULTIFAMILY
before these properties come online to provide competition
for existing single-family rentals.
3
UNITS (000S)

The Memphis investment market attracts cash-heavy buyers


2 at low price points. Average cap rates in Memphis are slightly
below 9 percent, well above the national rate. Furthermore,
1 higher-end investments can still be found for first-year returns
near 6 percent. Although most buyers are chasing yields in
0
the Memphis metro, some investors will consider the relatively
08 09 10 11 12 13 14 15 16*
safety of nicer homes. This is supported by a decline in cash
*Annualized 3Q 2016 YEAR
investment sales in this market. Overall, home prices in
Memphis continue to grow, which could begin to price some
VACANCY & RENT first-time buyers out of the market. An increase in interest rates
$1,200 SFR RENT VACANCY 25% will also apply pressure to homeownership rates and push
vacancy lower this year. Meanwhile, permitting has leveled off,
$900 20% which will limit the supply-side pressure facing SFR operators.
MONTHLY RENT

VACANCY

$600 15% MARKET OUTLOOK


Employment: Job growth is inching higher in Memphis. In
$300 10%
2017, employers are expected to create 8,000 jobs, a 1.3
percent year-over-year gain. Last year, 5,000 new positions
$0 5%
09 10 11 12 13 14 15 16 17*
were added to the economy.
*Forecast YEAR Vacancy: Memphis vacancy levels are projected to drop
by nearly 300 basis points from last years 8.4 percent as
household formation far outstrips new construction.
INVESTMENT HOME PRICE TRENDS
$60 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 10% Rent: Asking rents are projected to grow 1.8 percent to
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$1,058 per month this year. In 2016, the year ended with
$55 5%
rents at $1,040 per month.

$50 0% Investment: High yields and low entry prices will attract out-
of-state investors to Memphis in 2017. As prices elsewhere
$45 -5% mean fewer single-family deals pencil out, more investors
will consider this market in the coming months.
$40 -10%
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

26
MIAMI Employment: 1.9% Vacancy: 20 bps Rents: 2.0%

SOARING HOME PRICES DRIVE EMPLOYMENT TRENDS


RENTAL DEMAND IN MIAMI-DADE 6%
METRO US

YEAR-OVER-YEAR CHANGE
As South Floridas high-priced housing market starts to cool,
3%
demand for single-family and multifamily rentals will remain
strong, fueled by positively trending economic growth. Even
0%
though developers brought a glut of new condo projects
online over the past two years, home prices remain out of
-3%
reach for many buyers. As the luxury condo sector feels the
impacts of oversupply, both monthly multifamily and single- -6%
family rents will rise, while vacancies are on track to decline. 09 10 11 12 13 14 15 16 17*
Last year, builders issued a total of 9,200 residential permits. *Forecast YEAR
Miamis payrolls are expected to expand 1.9 percent in 2017.
Last year, regional employers added 19,600 positions to the
PERMITS
metro, with the greatest growth in the leisure and hospitality,
12 SINGLE-FAMILY MULTIFAMILY
and professional and business services sectors. Financial
services giant Wells Fargo signed the biggest lease in Miami
9
last year: a $32 million relocation and expansion at Wells

UNITS (000S)
Fargo Center, a Class A office tower located downtown. 6

International buyers primarily located in Latin America have


historically fueled investment home-buying activity in Miami- 3

Dade, although 2016 saw an exception to that trend as the


0
value of the U.S. dollar eclipsed other currencies. Overall
08 09 10 11 12 13 14 15 16*
investment activity in the local housing market declined by
*Annualized 3Q 2016 YEAR
approximately 50 percent year-over-year in 2016s. In spite
of this downturn, SFR cap rates declined 80 basis points to
6.8 percent last year as investment home prices increased. At VACANCY & RENT
the same time, strong growth occurred in the owner-occupied $2,400 SFR RENT VACANCY 20%

segment of the housing market, as median prices rose 12


percent to $307,500. While challenging for both international $2,100 15%
MONTHLY RENT

VACANCY
and local investors, out-of-state buyers from such locales as
$1,800 10%
the Bay Area or New York City may target acquisitions that
offer both healthy yields and modest appreciation relative
$1,500 5%
to coastal housing markets. Furthermore, competition for
investment housing will decline as institutional buyers
$1,200 0%
continue their exodus from the region, giving retail investors 09 10 11 12 13 14 15 16 17*
the upper hand in Miami. *Forecast YEAR

MARKET OUTLOOK
Employment: Employers in Miami are expected to increase INVESTMENT HOME PRICE TRENDS
$160 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
employment in the metro by 1.9 percent, or 22,000 jobs.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Vacancy: Vacancy levels are projected to drop 20 basis $120 12%


points to 6.5 percent.

Rent: Asking rents are projected to increase to $2,238 per $80 0%

month this year. This is a 2 percent rise annually.


$40 -12%

Investment: Investors from the Northeast may consider


SFRs in Miami that could serve as a future retirement home. $0 -24%
09 10 11 12 13 14 15 16*
Latin American investors, meanwhile, many consider the
*Through 3Q 2016 YEAR
safety of Miami assets amidst economic turmoil elsewhere.
27
OAKLAND Employment: 2.9% Vacancy: 30 bp Rents: 4.4%

EMPLOYMENT TRENDS
METRO US
CORPORATE RELOCATIONS, PORT OF OAKLAND
6%
EXPANSION DRIVE RENT GROWTH IN EAST BAY
YEAR-OVER-YEAR CHANGE

3%
The East Bay continues to welcome corporations relocating
from higher-priced offices in San Francisco and the Silicon
0% Valley. Although overall job growth slowed in 2016 to 2.8
percent, regional employers are expected to add more positions
-3% in 2017, pushing employment growth to 2.9 percent. The
largest contributor to the economy is the trade, transportation
-6% and utilities sector, bolstered by the Port of Oakland. The port
09 10 11 12 13 14 15 16 17*
recently opened a new shipping route between China and
*Forecast YEAR
Vietnam last year, and commenced build-outs to its container
terminal that will accommodate mega ships. The professional
PERMITS and business services sector keeps growing as tech firms and
4 SINGLE-FAMILY MULTIFAMILY other companies head east across the Bay Bridge. Uber plans
to move into Oaklands 330,000-square foot Uptown Station
3 in 2017, while Makani Power, a subsidiary of Google, plans to
UNITS (000S)

lease another 65,000 square feet in Alameda.


2
An exodus of renters from pricey San Francisco fueled home
1
price and SFR growth in Oakland over the past three years.
Both the owner-occupied and investment housing markets
0
reported strong gains. While the owner-occupied median
08 09 10 11 12 13 14 15 16* home price of $649,000 exceeds the median investment price
*Annualized 3Q 2016 YEAR of $475,000, demand among investors remains strong as SFR
cap rates dropped below 4 percent, reaching 3.9 percent last
year. Nonetheless, investors will compete for a limited number
VACANCY & RENT
of East Bay assets. The percentage of housing inventory
$3,200 SFR RENT VACANCY 8%
acquired for investment purposes plunged 3 percentage
points to 17.6 percent in 2016, a seven-year low. Revitalized
$2,400 6%
MONTHLY RENT

Oakland neighborhoods, such as Fruitvale, provide SFR


VACANCY

$1,600 4%
investors with the ability to earn solid yields, while Alameda,
Livermore and San Leandro offer longer-term appreciation
$800 2% opportunities.

$0 0%
MARKET OUTLOOK
09 10 11 12 13 14 15 16 17* Employment: In 2017, 33,000 positions are expected to be
*Forecast YEAR added after 31,000 additional spots were created last year.
New positions represent a 2.9 percent rise in payrolls.
INVESTMENT HOME PRICE TRENDS Vacancy: Oakland vacancies will tighten slightly this year. In
$400 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 36% 2016, market wide vacancy for single-family rentals was 3.5
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

percent. This year, it is projected at 3.2 percent.


$325 24%
Rent: Another high-rent California market, Oakland rents
$250 12% are projected to grow to $3,009 per month in 2017, a 4.4
percent year-over-year rise.
$175 0%
Investment: While above-average rent growth and strong
economic expansion are driving vacancy levels down,
$100 -12%
09 10 11 12 13 14 15 16* investor activity in Oakland is slowing due to high prices.
*Through 3Q 2016 YEAR
High costs and a long runway is limiting activity to investors
with extended time horizons.
28
ORANGE COUNTY Employment: 2.1% Vacancy: 10 bps Rents: 2.8%

HIGH PRICES, LOW CAP RATES FOR EMPLOYMENT TRENDS


METRO US
ORANGE COUNTY SFRS SLOW ACTIVITY 6%

YEAR-OVER-YEAR CHANGE
Orange County employers plan to keep hiring in 2017, adding
3%
another layer of robustness to the economy. New positions
are expected to total 34,000, a 2.1 percent increase for the 0%
year. The high-paying professional and business services
sector remains the biggest contributor to Orange Countys -3%
economic engine. Indicative of the regions ongoing growth,
the construction sector expanded at the highest rate of all -6%

nonfarm industries, jumping 5.7 percent year-over-year in 09 10 11 12 13 14 15 16 17*

2016. Commercial projects will rise with the influx of new *Forecast YEAR

construction workers. SpaceX leased 8,000 square feet of


office space in Irvine, making it the companys third location in PERMITS
California. Five Lagunas, a 68-acre site at the former Laguna 8 SINGLE-FAMILY MULTIFAMILY
Hills Mall, is being redeveloped into an urban town center-style
property with luxury multifamily units, a movie theater, a park 6

UNITS (000S)
and indoor and outdoor shops. Rent growth of 5.8 percent in
Orange County reached an eight-year high in 2015, pinnacling 4

at $2,924. Substantial additions to the rental housing inventory


both multifamily and SFRs will place downward pressure 2

on 2017 rents, which will moderate to growth of 2.8 percent in


2017. SFR vacancy dropped roughly 20 basis points from 2016 0
08 09 10 11 12 13 14 15 16*
to a low of 2.9 percent.
*Annualized 3Q 2016 YEAR
The investment housing market hasnt shown any signs of
cooling in Orange County. Median investment prices shot up
11 percent to the low-$700,000 area, relatively in-line with VACANCY & RENT
$3,600 SFR RENT VACANCY 8%
owner-occupied prices. Institutional investors have all but
left the region as transactions rarely pencil out from a yields
$3,100 6%
MONTHLY RENT

perspective. Cap rates plummeted to the low-3 percent range,

VACANCY
marking a five-year low. The number of retail homebuyers also
$2,600 4%
declined annually since 2015. For investors seeking strong
appreciation, SFRs in the coastal communities of Huntington $2,100 2%
Beach and Costa Mesa offer stable renter pools, while inland
buyers may find higher returns in Tustin and Yorba Linda. $1,600 0%
09 10 11 12 13 14 15 16 17*
MARKET OUTLOOK *Forecast YEAR
Employment: Payrolls are forecast to expand 2.1 percent in
2017, as 34,000 new jobs are created in Orange County.
INVESTMENT HOME PRICE TRENDS
Last year, employers added 38,000 spots.
$400 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 30%

PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Vacancy: Vacancy is projected to decrease by 10 basis


points to 2.9 percent in Orange County this year. $350 15%

Rent: Asking rents for SFRs in Orange County are projected $300 0%
to expand by 2.8 percent to $3,202 by the end of 2017.

Investment: Investors interested in Orange County are $250 -15%

banking on long-term appreciation. Tight cap rates and sky-


$200 -30%
high entry prices are leading the majority of investors to be 09 10 11 12 13 14 15 16*
selective when considering assets. *Through 3Q 2016 YEAR

29
ORLANDO Employment: 3.2% Vacancy: 300 bps Rents: 3.5%

EMPLOYMENT TRENDS HEALTHY TOURISM CREATING RENTER


6%
METRO US
HOUSEHOLDS IN ORLANDO
YEAR-OVER-YEAR CHANGE

The Orlando market has the second-highest projected


3%
employment growth of all the Florida metros. With a forecast
39,000 jobs to be added to the metro, local payrolls will expand
0%
3.2 percent this year. Technology and tourism will fuel growth
as the leisure and hospitality and professional and business
-3%
services sectors add thousands of new positions. Deloitte, for
-6%
example, is adding 800 IT positions with an average salary
09 10 11 12 13 14 15 16 17* of $70,000 to its Lake Mary center expansion. Additionally,
*Forecast YEAR the company plans to invest $246 million in Orlando for
the development of an upgraded technology development
center. Another major project taking place beginning this
PERMITS
year Is the $1.8 billion expansion of the Orlando International
16 SINGLE-FAMILY MULTIFAMILY
Airport. Expected to take at least three years to develop, this
12
project will create many temporary construction jobs, as well
UNITS (000S)

as hundreds of permanent positions upon completion of the


8
terminal in 2020.

Orlandos robust economy has created demand for housing,


4
which has placed upward pressure on median sales prices
for both investment homes and owner-occupied properties.
0
As a result, cash sales are down as investors use leverage to
08 09 10 11 12 13 14 15 16*
acquire assets at higher price points. However, while prices
*Annualized 3Q 2016 YEAR
increase across the board, both classes of buyers are moving
down the quality scale into older neighborhoods. Overall sales
VACANCY & RENT for both investment and traditional purchases are down from
$1,600 SFR RENT VACANCY 24% 2015 levels, largely due to price gains. Institutional activity has
also declined as foreclosure inventory dries up. Cap rates fell
$1,200 18% 20 basis points between in 2016, though they remain very
MONTHLY RENT

VACANCY

attractive. At the end of last year, first-year returns were north


$800 12%
of 6 percent. Strong rent growth should offset rising prices,
keeping average cap rates near their current range this year.
$400 6%

MARKET OUTLOOK
$0
09 10 11 12 13 14 15 16 17*
0%
Employment: The pace of employment growth in Orlando is
*Forecast YEAR
forecast at 3.2 percent as employers add 39,000 positions.

Vacancy: Vacancy at SFRs will continue its strong downward


INVESTMENT HOME PRICE TRENDS trend, dropping nearly 300 basis points to 2.8 percent. Last
$120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24% year, vacancy plunged 320 basis points.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Rents in Orlando grew to $1,469 per month, up 3.5


$100 12%
percent from 2016 when single-family rentals closed the
year at $1,419 per month.
$80 0%

Investment: Orlando SFRs continue to draw investors to the


$60 -12% market. Tourism, which supports thousands of jobs in the
metro, often precludes homeownership for local residents.
$40 -24%
As a result, investors can capitalize on this high-demand
09 10 11 12 13 14 15 16*
market in 2017.
*Through 3Q 2016 YEAR

30
PHOENIX Employment: 2.4% Vacancy: 40 bps Rents: 2.5%

NEW SUPPLY WILL APPLY UPWARD PRESSURE EMPLOYMENT TRENDS


ON VACANCY IN PHOENIX THIS YEAR 8%
METRO US

YEAR-OVER-YEAR CHANGE
The Phoenix job engine is performing well, supporting demand
4%
for rental units across the Valley. Construction employment
has been a standout sector over the past year, expanding by
0%
nearly 10 percent in 2016. A mix of residential and commercial
projects are fueling the rise in development jobs, a trend that
-4%
is expected to continue. At the end of last year, more than
11,000 multifamily rental units were underway, most of which -8%
will be completed this year. As rental construction peaks in 09 10 11 12 13 14 15 16 17*
2017, single-family landlords will compete with a wave of new, *Forecast YEAR
Class A apartments. As a result, single-family vacancy will tick
higher while rent growth abates. Nonetheless, the long-term
PERMITS
prospects for the market remain positive due to the areas
16 SINGLE-FAMILY MULTIFAMILY
healthy economic picture. For instance, Farmers Insurance
is considering an expansion that will create 1,000 jobs in the
12
market, joining State Farm who is in the process of adding

UNITS (000S)
8,000 Phoenix jobs. 8

Phoenix was a magnet for investors during the first few


years following the recovery, however, with a dearth of deals 4

available, this draw is declining. Following national trends,


0
cash investment sales are on the decline and barely outpace
08 09 10 11 12 13 14 15 16*
national levels. Prices for both traditional and investment sales
*Annualized 3Q 2016 YEAR
are growing, which has resulted in a decline in cap rates in
the metro. In fact, the median investment sales price shot up
to $179,000 in the metro at the end of last year. Heading into VACANCY & RENT
2017, average first-year returns were in the high-4 percent $1,400 SFR RENT VACANCY 20%

range, down approximately 20 basis points from one year


ago. In spite of this upswing in pricing, investors seeking $1,050 16%
MONTHLY RENT

VACANCY
returns, should look to emerging markets like Sunnyslope and
$700 12%
Northeast Phoenix, while older neighborhoods in Scottsdale
and Tempe continue to appreciate in value over the long term.
$350 8%

MARKET OUTLOOK
Employment: Payrolls are forecast to jump 2.4 percent this $0
09 10 11 12 13 14 15 16 17*
4%

year as employers add 48,000 new positions. *Forecast YEAR

Vacancy: Vacancy levels are expected to increase by 40


basis points this year to 6.3 percent.
INVESTMENT HOME PRICE TRENDS
Rent: In 2017, single-family rents in the Phoenix metro are $120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 28%
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

projected to grow 2.5 percent to $1,380 per month.


$100 14%
Investment: Prices are growing, which has resulted in
a decline in cap rates in the metro. Heading into 2017, $80 0%

average first-year returns were in the high-4 percent


range, down approximately 20 basis points. Investors are $60 -14%

taking advantage of Phoenix SFR acquisitions due to their


attractiveness relative to nearby West Coast metros. $40 -28%
09 10 11 12 13 14 15 16*
*Through 3Q 2016 YEAR

31
PORTLAND Employment: 2.5% Vacancy: 60 bps Rents: 3.2%

EMPLOYMENT TRENDS LED BY AN INFLUX OF VENTURE CAPITAL TO


6%
METRO US REGION, PORTLANDS ECONOMY STRENGTHENS
YEAR-OVER-YEAR CHANGE

Portland had a standout year from an economic growth


3%
perspective and the residential real estate market continues
to heat up. Employers added 31,000 jobs to the local economy
0%
in 2016, growing at a rate of 2.8 percent. In 2017, payrolls will
rise 2.5 percent. The trade, transportation and utilities sector,
-3%
as well as professional and business services, serve as the
-6%
main drivers of the local economy, yet manufacturing remains
09 10 11 12 13 14 15 16 17* strong, thanks to major regional employers like Intel. Contrary
*Forecast YEAR to the national trend, a flood of VC money has entered the local
market: In 3Q 2016, $87 million in VC funding closed, three
times more deals than during the same time period in 2015.
PERMITS
A testament to the regions popularity as a metropolis that
8 SINGLE-FAMILY MULTIFAMILY
attracts innovative thinkers, many of whom are Generation X
and Millennial renters, Portland ranked fourth on the U.S. Clean
6
Tech Leadership Index, a measure focused on technology
UNITS (000S)

4
policy and capital with respect to clean technology and green
practices. Despite builders responding to the pent-up demand
2
for housing units by expanding overall inventory, rent growth
in this market is still strong, achieving a 3.2 percent expansion
0 this year. In fact, rent growth has been sliced in half each year
08 09 10 11 12 13 14 15 16* since 2015 when it skyrocketed 12.8 percent.
*Annualized 3Q 2016 YEAR
Strong renter demand in Portland will bode well for SFR
investors with the financial wherewithal to acquire properties
VACANCY & RENT in the area. Year-over-year investment home prices soared 8
$2,000 SFR RENT VACANCY 6% percent in 2016 to $300,000, while cap rates have remained
in the low 4-percent-range for the past nine years. Investment
$1,600 5% sales comprise more than one-fifth of the areas housing
MONTHLY RENT

VACANCY

inventory, and a significant share of those buyers 55 percent


$1,200 4%
are using all cash. That compares to 51.2 percent of investors
nationwide utilizing cash. Investors searching for appreciation
$800 3%
will target the submarkets of Lents and Pleasant Valley.

$400 2% MARKET OUTLOOK


09 10 11 12 13 14 15 16 17*
*Forecast YEAR
Employment: Still outperforming national levels, employers
in Portland are projected to increase employment levels by
2.5 percent. This is an addition of 29,000 jobs. Last year,
INVESTMENT HOME PRICE TRENDS 31,000 new spots were created.
$200 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
Vacancy: Vacancy is projected to grow by 60 basis points
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$175 12% to 5.5 percent in 2017. In 2016, levels were at 4.9 percent.

$150 0%
Rent: Portland is expected to experience solid single-family
rent growth this year. In 2017, rents are forecast to grow 3.2
percent to $1,902 per month.
$125 -12%

Investment: Investor demand in this region remains strong,


$100 -24% due to excellent employment growth and additions in the
09 10 11 12 13 14 15 16*
Millennial population.
*Through 3Q 2016 YEAR

32
RALEIGH-DURHAM Employment: 2.4% Vacancy: 130 bps Rents: 2.7%

RALEIGH-DURHAM SFR INVESTMENT MARKET EMPLOYMENT TRENDS


TRACKS TO NATIONAL SFR TRENDS 6%
METRO US

YEAR-OVER-YEAR CHANGE
The largest employment sectors in the Raleigh-Durham
3%
investment market are the professional and business services,
as well as the trade, transportation and utilities, which are
0%
expected to keep growing in 2017. Local employers plan to
add 22,000 jobs this year, an improvement over the 20,000
-3%
gained in 2016. Raleighs 2.4 percent payroll expansion
matches the national rate. Tech is a major driver of growth. -6%
Citrix Systems, for example, will add 400 new positions to the 09 10 11 12 13 14 15 16 17*
economy over the next five years. Supply additions will begin *Forecast YEAR
to apply greater pressure on rental conditions. Single-family
permitting has remained elevated over the past four years.
PERMITS
The Far North Raleigh and North Cary/Morrisville submarkets
16 SINGLE-FAMILY MULTIFAMILY
are well-positioned to handle new supply, which should keep
SFR vacancy in these areas low.
12

UNITS (000S)
In addition to a steady economic performance, low single-
family vacancy and strong projections for rent growth will draw 8

investors to the Raleigh-Durham market. A modest rise in new


supply last year ensures that prices will remain competitive. 4

As with most other markets, overall investment volume in the


0
metro has slowed over the past two years; however, cash
08 09 10 11 12 13 14 15 16*
investment purchases are rising. In fact, more than 75 percent
*Annualized 3Q 2016 YEAR
of last years investments in Raleigh-Durham were purchased
using cash. Additionally, cap rates have remained steady in
this market since the recovery, luring investors with a mid- VACANCY & RENT
5 percent return, a performance that follows the national $1,600 SFR RENT VACANCY 12%

trend. While traditional buyers are moving up the quality


scale in Raleigh-Durham into newer properties, investors are $1,200 9%
MONTHLY RENT

VACANCY
remaining in neighborhoods of similar quality, albeit in smaller-
$800 6%
sized homes.

MARKET OUTLOOK $400 3%

Employment: Employers in the Raleigh-Durham metro are $0 0%


expected to add 22,000 new positions this year, a growth 09 10 11 12 13 14 15 16 17*
of 2.4 percent over last year. In 2016, 20,000 new openings *Forecast YEAR
were created.

Vacancy: Raleighs single-family rental vacancy is expected INVESTMENT HOME PRICE TRENDS
to end the year at 3.3 percent. Last year, the vacancy rate $120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
was 4.6 percent.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: In Raleigh, single-family rents are anticipated to grow $100 12%

2.7 percent to $1,492 per month.


$80 0%

Investment: The research triangle generates a significant


share of renter demand. Young tech workers and current $60 -12%

university students tend to prefer renting over ownership,


providing SFR operators ample opportunities to keep $40 -24%
09 10 11 12 13 14 15 16*
occupancy levels high.
*Through 3Q 2016 YEAR

33
SAN ANTONIO Employment: 1.9% Vacancy: 10 bps Rents: 1.7%

EMPLOYMENT TRENDS STABILIZING ENERGY PRICES, EXPANDING


6%
METRO US PAYROLLS SUPPORT SFR FUNDAMENTALS IN
ALAMO CITY
YEAR-OVER-YEAR CHANGE

3%
The San Antonio metro hums along steadily with 19,000
new jobs projected to be added this year, a 1.9 percent gain.
0%
Overall, the rapid explosion in employment following the
recession has slowed as the energy sector has dragged on
-3%
overall growth. Within the market, trade, transportation and
-6%
utilities, education and health services, and government make
09 10 11 12 13 14 15 16 17* up three of the largest sectors of economy, and are expected
*Forecast YEAR to continue their growth. As part of a grant from the Economic
Development Incentive Fund, Oracle America, Inc. will add 350
jobs to the metro, with a minimum salary of $50,000. During
PERMITS
the fourth quarter of 2016, a $175 million redevelopment
8 SINGLE-FAMILY MULTIFAMILY
project was begun on San Antonios San Pedro Creek. This
second River Walk is expected to drive demand and further
6
new development in a currently underutilized portion of the
UNITS (000S)

4
citys downtown. This may lure further corporate expansions
and relocations to this region of the metro in the coming years.
2 Home prices in San Antonio continue to grow across both
the traditional and investor segments. As with most markets
0
across the nation, traditional home buyers are moving into
08 09 10 11 12 13 14 15 16*
higher priced properties in newer neighborhoods. Investors in
*Annualized 3Q 2016 YEAR
this market, however, are remaining in mid-tier neighborhoods
where renter demand is strong. Cap rates in San Antonio
VACANCY & RENT continue to outperform national rates, though they have
$1,600 SFR RENT VACANCY 14% dropped to just below 7 percent. Projected rent growth for
2017 has also dropped slightly; rents are expected to increase
$1,400 12% 1.7 percent over 2016 levels. Slower NOI growth and strong
MONTHLY RENT

VACANCY

appreciation could place downward pressure on first-year


$1,200 10%
returns this year.

$1,000 8% MARKET OUTLOOK

$800 6%
Employment: Employment growth in San Antonio remains
09 10 11 12 13 14 15 16 17*
steady, expanding by 1.9 percent, with 19,000 new spots
*Forecast
expected this year. Last year, employers added 13,500
YEAR
positions.

INVESTMENT HOME PRICE TRENDS


Vacancy: Vacancy remains elevated in San Antonio. In
$100 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 16%
2016, it was 9.5 percent. This year, it is expected to improve
slightly and end the year at 9.4 percent.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

$90 8%
Rent: In 2016, San Antonio rents ended the year at $1,399
per month. This year, landlords are expecting a 1.7 percent
$80 0%
improvement, raising rents to $1,423 per month.
$70 -8% Investment: Planned redevelopment of the San Pedro
Creek region of downtown San Antonio will drive new
$60 -16% development in the coming years. With steady employment
09 10 11 12 13 14 15 16*
and declining vacancies, this submarket still will retain long-
*Through 3Q 2016 YEAR
term potential for single-family investors.
34
SAN DIEGO Employment: 2.5% Vacancy: 90 bps Rents: 3.5%

TECHNOLOGY SECTOR DRIVES RENTER DEMAND EMPLOYMENT TRENDS


IN SAN DIEGO; VACANCY LEVELS REACH NEW LOW 6%
METRO US

YEAR-OVER-YEAR CHANGE
The technology and biotech sectors have reshaped San
3%
Diego, bolstering job growth and contributing to the metros
economic expansion. Last year, the economy grew 2.3 percent
0%
as local employers added 32,000 new positions, yet in 2017,
the economy is projected to grow even further to 2.5 percent
-3%
with the addition of 36,000 new jobs. According to startup
accelerator CONNECT, the innovation sector accounts for $52 -6%
billion, or 24 percent of the regions gross GDP. San Diego 09 10 11 12 13 14 15 16 17*
County ranks among the top 10 for startup activity, launching *Forecast YEAR
405 new companies in 2015 and is No. 1 in the country for
life sciences startups. The San Diego Regional Economic
PERMITS
Development Corp. also recently reported that the metro
8 SINGLE-FAMILY MULTIFAMILY
ranks seventh among the top 50 U.S. metros for its software
industry, ahead of Austin, New York City and Portland. In 2017,
6
vacancy is anticipated to dip to 1.6 percent, a decade-low rate.

UNITS (000S)
Investors are relatively active in the market, though high entry 4

costs limit the amount of activity. The number of investment


sales as a percent of overall transactions is well below the 2

national average due to tight conditions. Nonetheless,


0
buyers willing to bring a significant amount of cash to each
08 09 10 11 12 13 14 15 16*
transaction can find attractive deals. Typically, leveraged
*Annualized 3Q 2016 YEAR
investors are counting on appreciation as a primary source of
wealth creation. Average cap rates for investment properties
are in the mid-3 percent range. Upward pressure on yields, VACANCY & RENT
particularly in some heated coastal areas, should materialize $2,800 SFR RENT VACANCY 12%

as interest rates climb in the coming months. Over the past


four years, average cap rates have remained relatively stable $2,100 9%
MONTHLY RENT

VACANCY
in the mid- to high-3 percent range despite rising prices. To
$1,400 6%
achieve these yields, investors have moved further away from
the coast where prices can be significantly lower. This year,
$700 3%
rising capital costs will shrink the pool of deals that pencil out,
requiring investors to do more due diligence.
$0 0%
09 10 11 12 13 14 15 16 17*
MARKET OUTLOOK
*Forecast YEAR
Employment: This year, 36,000 new positions are expected
to be created in San Diego, a 2.5 percent gain.
INVESTMENT HOME PRICE TRENDS
Vacancy: SFR vacancy remains extremely tight in San Diego. $320 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 36%
This year, it is expected to drop to 1.6 percent, down 90
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

basis points for the year. $265 24%

Rent: By year-end, rents are forecast to tick up to $2,616 per $210 12%
month, a 3.5 percent gain for the year.

Investment: With a higher cost of entry, investors in San $155 0%

Diego tend to rely on leverage. Cap rates in this market


have been consistent around 3 percent. To maintain these $100 -12%
09 10 11 12 13 14 15 16*
yields, single-family investors are moving inland, where
*Through 3Q 2016 YEAR
price growth is less heated than the coast.
35
SAN FRANCISCO Employment: 2.7% Vacancy: 30 bps Rents: 1.7%

EMPLOYMENT TRENDS VENTURE CAPITAL, FUNDING SLOWDOWN IMPACT


6%
METRO US SAN FRANCISCOS REAL ESTATE MARKET
YEAR-OVER-YEAR CHANGE

San Francisco employment growth has slowed due to a


3%
decrease in VC funding. Last year, the metro added 31,000
jobs, expanding 2.6 percent annually, and is forecast to grow
0%
2.7 percent in 2017. The professional and business services
sector fuels the metros economy, led by the high-tech and
-3%
biotech/life sciences sectors. In South San Francisco, a JV
-6%
acquired The Landing at Oyster Point for $171 million. Starting
09 10 11 12 13 14 15 16 17* in 2018, it plans to redevelop the site into a $1 billion office
*Forecast YEAR and R&D complex. Meanwhile, Mission Rock, a project in San
Franciscos Mission Bay district, will include office, retail and
residential space near AT&T Park, as well as a new pier facility
PERMITS
for locally based Anchor Brewing Co. The developer will also
8 SINGLE-FAMILY MULTIFAMILY
set aside 40 percent of the 1,500 units for lower- and middle-
income residents. Voters in the city of San Francisco passed
6
a measure that requires one-quarter of all new housing units
UNITS (000S)

4
to be affordable, thus slowing the pace of new multifamily
construction in 2017. The measure, known as Proposition C,
2
will also place downward pressure on already-tight vacancies.

With the tech VC funding spigot flowing slower in the Bay


0
Area, San Franciscos luxury housing market has started to
08 09 10 11 12 13 14 15 16*
soften, yet the market for mid- to lower-priced owner-occupied
*Annualized 3Q 2016 YEAR
and investment homes remains solid. Overall median owner-
occupied housing prices exceeded $1.2 million in the metro
VACANCY & RENT last year, whereas median SFR prices in the metro topped $1
$4,400 SFR RENT VACANCY 8% million. With double-digit investment home price growth and
low cap rates, most of the regions inventory remains out-of-
$3,300 6% reach for investors. Prices for investment housing in urban
MONTHLY RENT

VACANCY

infill areas like Mission Bay remain out of reach for investors
$2,200 4%
seeking yields, so instead target the East Bay.

$1,100 2% MARKET OUTLOOK

$0 0%
Employment: Job growth is anticipated to accelerate to 2.7
09 10 11 12 13 14 15 16 17*
percent this year, as 33,000 positions are created. Last year,
*Forecast
31,000 spots were filled.
YEAR

Vacancy: This year, vacancy is anticipated to drop to 3.2


percent by the end of the year, representing a 30-basis
INVESTMENT HOME PRICE TRENDS
$800 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 28%
point decline.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Single-family rents are forecast to grow 1.7 percent to


$600 14%
$4,390 per month in 2017.

$400 0% Investment: One of the highest-priced markets in the


country, SFR investors in San Francisco are focusing on
$200 -14% farther-flung submarkets where cap rates are highest.
With entry prices exceeding $1 million, most investors are
$0 -28% seeking alternative markets.
09 10 11 12 13 14 15 16
*Through 3Q 2016 YEAR

36
SAN JOSE Employment: 3.3% Vacancy: 60 bps Rents: 1.4%

SILICON VALLEY TECH STANDBYS LEAD EMPLOYMENT TRENDS


SAN JOSES ECONOMIC GROWTH 6%
METRO US

YEAR-OVER-YEAR CHANGE
A well-educated workforce and innovative tech companies will
3%
continue to drive San Joses economy. Employment growth
in 2017 is expected to remain on par with last years growth,
0%
edging up slightly to 3.3 percent. Employers in the region will
add 36,000 jobs, courtesy of such tech stalwarts as Cisco
-3%
Systems, eBay, Facebook, Google, Intel and Oracle. While
VC funding firms have slowed financing for startups across -6%
the U.S., VCs are still investing in Silicon Valley companies. 09 10 11 12 13 14 15 16 17*
Andreessen Horowitz and KleinerPerkinsCaufield & Byers *Forecast YEAR
(KPCB), both based in Menlo Park, led the Bay Area in VC
funding during the second quarter of 2016, raising $1.5 billion,
PERMITS
while KPCB raised $1 billion. Meanwhile, the Saudi Arabia
8 SINGLE-FAMILY MULTIFAMILY
Investment Fund made a $3.5 million commitment to Uber
Technologies, one of the regions standout companies. On the
6
supply side, the addition of new units kept rents in check last

UNITS (000S)
year. In 2017, SFR rents are anticipated to rise 1.4 percent to 4
roughly $3,700 per month.

Investment and owner-occupied homes still trade at premium 2

values in San Jose, although price growth has shown some


0
signs of abating, especially in the luxury sector. SFR price
08 09 10 11 12 13 14 15 16*
growth peaked in 2013, but has since dropped to about one-
*Annualized 3Q 2016 YEAR
third of those levels, rising 9.7 percent in 2016 to $900,000.
In addition, investment housing cap rates declined 10 basis
points in 2016 to an eight-year low of 3.2 percent, making the VACANCY & RENT
investment housing market out-of-reach for most investors. $4,000 SFR RENT VACANCY 8%

SFR buyers snagged more than 13 percent of the regions


homes as investments in 2015, compared to 7 percent of $3,500 6%
MONTHLY RENT

VACANCY
homes as investments in 2016. SFR housing prices remain at
$3,000 4%
a premium in the Silicon Valley, although investors seeking
long-term appreciation may want to target infill San Jose
$2,500 2%
neighborhoods away from the higher-priced Silicon Valley and
downtown markets.
$2,000 0%
09 10 11 12 13 14 15 16 17*
MARKET OUTLOOK
*Forecast YEAR
Employment: Staffing levels are projected to expand 3.3
percent as 36,000 positions are created, building on last
years 35,000 jobs. INVESTMENT HOME PRICE TRENDS
$700 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 36%
Vacancy: SFR vacancy is expected to inch up in 2017. This
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

year, landlords should expect 5.0 percent vacancy, up 60 $550 24%


basis points year-over-year.

Rent: Market-rate rents in San Jose are expected to rise 1.4 $400 12%

percent to $3,719 per month by the end of the 2017.


$250 0%

Investment: While demand for rentals in this market remains


healthy, high prices will keep most investors out of this $100 -12%
09 10 11 12 13 14 15 16*
market. Those with the resources to continue to expand
*Through 3Q 2016 YEAR
their portfolios will come to the table with significant cash.
37
SEATTLE Employment: 3.3% Vacancy: 80 bps Rents: 5.5%

EMPLOYMENT TRENDS TECH HIRING SPURRING STRONG JOB GROWTH


6%
METRO US AND RENTER DEMAND IN SEATTLE
YEAR-OVER-YEAR CHANGE

The Seattle economy peaked in 2016, with employment


3%
growth of a stellar 3.9 percent an eight-year high. A total of
63,000 positions were added to the local economy. This year,
0%
growth will decline to 3.3 percent, but is still strong by national
standards. Employers will add 56,000 positions to the local
-3%
economy, led by the booming construction sector. A newly
-6%
constructed 36-story skyscraper by local developer Martin
09 10 11 12 13 14 15 16 17* Selig in Belltown fueled the construction sectors expansion.
*Forecast YEAR WeLive, the sister company to co-working firm WeWork,
signed a 500,000-square foot lease at the tower for use as
a co-living space, an innovative concept thats new to the
PERMITS
West Coast. Amazon, the metros largest employer, continued
16 SINGLE-FAMILY MULTIFAMILY
its expansion with 286,000 square feet of new space at
a South Lake Union office building in early 2016. In spite of
12
new housing supply, vacancy is expected to drop 80 basis
UNITS (000S)

8
points in 2017 to a decade-low rate of 2.1 percent. Rent growth,
however, will slow to 5.5 percent to $2,350 per month.
4 Price growth for Puget Sound SFRs has remained strong due
to high renter demand derived from job growth. A wave of
0
investors from China and other foreign countries pouring
08 09 10 11 12 13 14 15 16*
capital into the local market drove median prices for all
*Annualized 3Q 2016 YEAR
types of homes to $450,000 last year after British Columbia
levied a 15 percent tax on foreign buyers purchasing homes
VACANCY & RENT in Vancouver. The percentage of investment home sales,
$2,400 SFR RENT VACANCY 8% however, dropped 120 basis points year-over-year to 18.3
percent, while the number of cash buyers active in the market
$1,800 6% dropped 500 basis points to 52.1 percent in 2016. For SFR
MONTHLY RENT

VACANCY

investors seeking yields, Columbia City offers inventory, while


$1,200 4%
West Seattles popular neighborhoods are strong long-term
appreciation plays.
$600 2%

MARKET OUTLOOK
0%
$0
09 10 11 12 13 14 15 16 17*
Employment: Employment is projected to expand 3.3
*Forecast
percent as 56,000 positions are created in 2017.
YEAR

Vacancy: Seattles single-family rental vacancy remains


tight. This year, the rate is anticipated to decline 80 basis
INVESTMENT HOME PRICE TRENDS
$120 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
points to 2.1 percent.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Rent: Asking rents are expected to see steady growth in


$100 12%
2017 as operators lift rents 5.5 percent to $2,347 per month.

$80 0% Investment: Seattle still has some inventory for those with
the resources to manage the markets higher entry prices.
$60 -12% Investors interested in stronger immediate yields will focus
on the Columbia City submarket, while those seeking long-
$40 -24% term growth from appreciation could turn their attention to
09 10 11 12 13 14 15 16*
West Seattle.
*Through 3Q 2016 YEAR

38
TAMPA Employment: 2.3% Vacancy: 10 bps Rents: 2.8%

HIGH YIELDS AND STRONG JOB GAINS KEEP EMPLOYMENT TRENDS


TAMPA AMONG MOST ATTRACTIVE MARKETS 6%
METRO US

YEAR-OVER-YEAR CHANGE
Similar to the other major Florida markets, strong job growth is
3%
expected for Tampa in 2017. Employment sectors responsible
for Tampas growth include trade, transportation and utilities;
0%
professional and business services; and education and health
services. One of the largest expansions in this space is being
-3%
undertaken by BlueGrace Logistics, a private-equity funded
transportation logistics company. Beginning in 2016, and -6%
extending through 2020, the firm will hire for at least 1,000 09 10 11 12 13 14 15 16 17*
new positions. Manufacturing jobs are also seeing a slight *Forecast YEAR
increase in the region, as evidenced by at least three major
expansion projects by Fresco Foods, North American Roofing,
PERMITS
and Johnson & Johnson. In total, these companies will spend
12 SINGLE-FAMILY MULTIFAMILY
over $25 million on growing their respective presences, while
creating a minimum of 750 new positions in the metro. Other
9
notable projects include Accusoft and Iron Boy Technologies.

UNITS (000S)
The former is a Tampa-based imaging company that will 6
double its workforce by 2021. In total, the company will create
125 new positions, each paying $75,000 or more, annually. 3
The latter is a Virginia-based tech support company, that will
open a Tampa customer service center and hire for at least 0
170 additional positions. 08 09 10 11 12 13 14 15 16*
*Annualized 3Q 2016 YEAR
While Florida was late to the recovery, price growth has
rebounded for both traditional and investment homes. More
investors are utilizing leverage than previously, however, VACANCY & RENT
the percentage of cash investment sales still outpace $1,600 SFR RENT VACANCY 15%

national levels. Appreciation has also led to a decrease in


the percentage of investment sales in the Tampa market, $1,200 12%
MONTHLY RENT

VACANCY
mirroring the national trend. Nonetheless, average cap rates
$800 9%
remain attractive, above 7 percent, though have experienced
a slight compression in the past year. While investors in
$400 6%
other Florida markets such as Orlando and Jacksonville have
moved down the quality scale to compensate for the growth
$0 3%
in prices, investors in Tampa continue to invest in the same 09 10 11 12 13 14 15 16 17*
neighborhoods as the year prior. *Forecast YEAR

MARKET OUTLOOK
Employment: Employers are expected to add 30,000 new INVESTMENT HOME PRICE TRENDS
$100 MEDIAN PRICE PER SQUARE FOOT YEAR-OVER-YEAR CHANGE 24%
jobs in 2017, representing a 2.3 percent gain.
PRICE PER SQUARE FOOT

YEAR-OVER-YEAR CHANGE

Vacancy: Vacancy rates in this market are projected to tick $80 12%
up slightly from 2016 levels, ending the year at 7.5 percent.

Rent: By year end, operators are expected to raise rents to $60 0%

$1,411 per month, up 2.8 percent.


$40 -12%

Investment: Cap rates exceeding 7 percent are drawing


investors searching for above-average yields to Tampa. $20 -24%
09 10 11 12 13 14 15 16*
While late to the recovery, job growth should support renter
*Through 3Q 2016 YEAR
demand across most submarkets.
39
Research Services
HomeUnions Research Services team analyzes local, national and global trends to determine the impact of an evolving
economic climate on the performance of single-family rental properties. Utilizing big data and up-to-date economic information,
analysts provide investors and owners the information needed to make investment decisions based on their goals.

Current Investment Locations:


Atlanta Cleveland Raleigh-Durham

Austin Dallas/Fort Worth San Antonio

Charlotte Indianapolis Tampa

Chicago Orlando

Prepared by: Senior Management Team:


Steve Hovland, Director-Research and Communications Don Ganguly, Chief Executive Officer
Don@homeunion.com
Stacey Corso, Communications Manager Chiranjib Pal, Chief Financial Officer
CP@homeunion.com
Pasha Manali, Research and Communications Associate
Geri Brewster, Chief Compliance and Risk Officer
Geri@homeunion.com
Eden Ellis, Data Scientist

40
Contact:
Steve Hovland Don Ganguly Media Contact:
Director-Research Services CEO Stacey Corso
shovland@homeunion.com don@homeunion.com Communications Manager
2010 Main Street, Suite 250 2010 Main Street, Suite 250 stacey.corso@homeunion.com
Irvine, California 92614 Irvine, California 92614 (415) 672-6460
(949) 229-8625 (866) 732-3220

PHONE EMAIL WEB ADDRESS


+1-866-732-3220 info@homeunion.com www.homeunion.com 2010 Main Street, STE 250
Irvine, CA 92614