Government reform of the GSEs strengthens the outlook for rental housing demand as mortgage insurance costs climb 25 basis points and minimum down payments rise to $10k. Higher ongoing financing costs and significantly higher down payment restrictions will keep consumers in the rental market longer, supporting rental rates and occupancy at major apartment REITs, including AvalonBay Communities (AVB).
AVB is already seeing solid improvement in rental metrics. In 2010, year-over-year rental rates moved from down 2.5% in Q1 to up 2.5% exiting Q4. And AvalonBay sees further strengthening in 2011, projecting 3% to 6% rental rate same store growth in 2011 on high single digit effective rent increases. Stronger rents and occupancy will support 16% FFO growth to $4.50-4.75 per share this year.
In 2010, young renters benefited from a 1.3 million increase in private sector jobs. And more jobs are likely this year given the American Staffing Association?s weekly
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