SANTA ANA, CA – First American Financial Corporation, a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, released the December 2017 First American Real House Price Index (RHPI). The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.

“Earlier this month, the Bureau of Labor Statistics reported that average hourly earnings increased in January by 2.9 percent compared with a year ago. This was a huge splash of economic news that had ripple effects on the housing market, as the 2.9 percent increase in wages surpassed expectations,” said Mark Fleming, chief economist at First American. “Rising wages mean home buyers can borrow more. In other words, consumer house-buying power – how much one can buy based on changes in income and interest rates – is growing, which is a boon to the housing market.

“But, the larger than expected increase in wage growth set off a chain reaction. It increased concerns among investors that inflation will rise and the Federal Reserve will increase rates at a quicker pace than previously expected. Consequently, the 30-year, fixed-rate mortgage rate increased to 4.4 percent last week,” said Fleming. “The consensus among economists is that 30-year, fixed-rate mortgage rates will approach 5 percent by the end of the year. Rising interest rates increase borrowing costs for home buyers, thereby decreasing consumer house-buying power.

“So, on the one hand, rising mortgage rates reduce the affordability of housing, as the cost of borrowing increases. But, on the other hand, rates are increasing because wages are rising quicker than expected. Wage growth simultaneously helped and hurt housing affordability,” said Fleming. “But, rising household income has largely offset the increase in borrowing costs brought about by higher interest rates in the past year. In December, consumer house-buying power was up 5.6 percent compared with a year before, even though mortgage rates increased in 2017.”

“Household income varies substantially by housing market, so comparing house-buying power with house prices by market can provide perspective on housing affordability,” said Fleming. “In the accompanying chart, home buyers in markets below the line have house-buying power that is greater than the average house price in their market – houses are relatively more affordable in these markets. Home buyers in markets above the line have house-buying power that is less than the average house price in their market – houses are relatively less affordable in these markets.

“It’s no surprise that house prices exceed house-buying power in markets like San Francisco, New York and Los Angeles. Yet, housing markets generally considered expensive, like Washington, D.C., Boston and Denver, are really more affordable than many believe,” said Fleming. “The fact is most of the markets we monitor in our Real House Price Index (RHPI) have more than enough house-buying power when compared to the average house prices in the market.

“It’s vital to remember that rising mortgage rates are often the result of positive economic conditions, like rising incomes and strong economic performance. In 2018, home buyers may have to take the excellent, wage growth, with the terrible, rising mortgage rates,” said Fleming.

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SAN DIEGO, CA – Wood Partners, a leader in real estate development and construction, announced The Rey has been named the “Community of the Year” and awarded the title of “Best High-Rise Community” at the 2017 National Association of Home Builders (NAHB) Multifamily Pillars of the Industry Competition. The Community of the Year Award is the most prestigious award and top honor for the annual competition.

Judging criteria was based on the development design and concept of the project, the site design and footprint of the building, quality of common areas, floor plans and unit designs, product design and curb appeal, the project costs and the overall success in the marketplace.

The 478-unit community was selected in part based on the 17,000 square foot rooftop deck overlooking San Diego Bay and the skyline – considered the most amenitized roof in the city.

Wood Partners and the Berkshire Group started construction in 2014 on the development originally designed by Gray Development. Wood Partners made a few modifications to the original design to make an outdoor experience, taking full advantage of San Diego’s unparalleled climate. On The Rey’s roof, residents can cook, game, gather and relax with features such as a resort-style pool, poolside cabanas, private lounges, barbecue stations, and a kitchen area which includes beverage coolers and picnic tables in an open-air environment 240 feet above the ground.

The Rey’s unique neighborhood location allows residents to experience the differing cultures of the Gaslamp Quarter, Cortez Hill, and East Village while still having access to public transportation and the ability to walk or bike to San Diego’s well-known Balboa Park.

In addition to The Rey’s ideal rooftop deck area, The Rey’s residents delight in “The Ground Floor Project,” an experiential program focused on making a sense of community through resident interaction with local artists, entertainers, and educators. The Ground Floor Project, an exclusive feature of a Wood Partners’ community, is led by a dedicated Cultural Development Manager who curates this unique programming.

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CENTERVILLE, VA – Apartment Investment and Management Company announced that it has bought the Bent Tree apartment community in Fairfax County, VA for $160 million, resulting in an expected $0.01 per share increase to Adjusted Funds From Operations in the first 12 months of ownership.

Bent Tree, a property with 748 apartment homes, is located in suburban Fairfax County near two other Aimco communities with 1,000 apartment homes. Bent Tree has average rents of approximately $1,500 per unit, making this a “B” quality community, with the potential for greater than market rate revenue growth through in unit capital enhancements.

“We are pleased to add Bent Tree to the Aimco portfolio, increasing our exposure to the attractive Fairfax County submarket,” said Aimco Chairman/CEO Terry Considine. “Located within commuting distance of downtown D.C. and just minutes from Dulles International Airport, Bent Tree offers residents convenient access to employment while also providing comfortable homes and onsite amenities that support their suburban lifestyle.”

Consistent with its paired trade discipline, Aimco plans to sell an equivalent value of apartment communities with lower expected free cash flow internal rates of return (“FCF IRR”) and lower rental growth prospects. Although the specific communities to be sold will depend on pricing, Aimco expects the FCF IRR of Bent Tree to exceed by at least 300 bps the FCF IRR of the properties sold to fund the acquisition.

The acquisition was funded with bank borrowings pending the expected third quarter sales to complete the paired trade funding.

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