Elements of Market Analysis, Part One

1. National Council of Housing Market Analysts Presents: Elements of Market Analysis, Part One Kentucky Housing Conference October 9, 2013 Lexington, Kentucky

2. NCHMA Membership organization Higher level of professionalism Ethics and professional accountability Education Peer review Sharing of information and resources Formed in 2001 in response to legislation Requirements vary from state to state 26 states adopted NCHMA standards in some form Page 2 www.housingonline.com

3. NCHMA Resources Minimum standards and best practices Certification in every report Model Content - Market study index Glossary of terminology White papers Market Area Analyzing senior demand and senior markets Factors to consider with preservation properties: Section 8 and 236 Recommended practices for analyzing turnover Page 3 www.housingonline.com

4. NCHMA White papers (continued) Demand and C/R methodology Calculating market rent Selecting comparable properties Determining market area Best practices for rural markets Recommended practices for determining demand Site analysis (DRAFT) www.housingonline.com Page 4 www.housingonline.com

5. Who’s in the Room? Developer? Syndicator? Housing Finance Agency? Market Analyst? Other Professional? Page 5 www.housingonline.com

6. Speakers • Jonathan Beery, Valbridge / Allgeier Company • Patrick Bowen, Bowen National Research • Caitlin Geary, National Council of Housing Market Analysts Page 6 www.housingonline.com

7. Program Agenda Welcome & Introductions NCHMA Background Introduction to Market Analysis What is a Market Study? Project Description and Site Analysis Determining Market Area Economic Context Demographics Page 7 www.housingonline.com

8. Introduction to Market Analysis • What is a Market Study? • Types of Market Studies • Components of Market Studies • Scope of Work Page 8 www.housingonline.com

9. What is a Market Study? A comprehensive forward looking analysis of the housing market in a defined market area. Housing needs in specific geography Specific need for proposed development Users Developers Syndicators Government entities Investors Page 9 www.housingonline.com

10. Who are the Users/Consumers/Clients? Page 10 www.housingonline.com

11. What is a Market Study? A comprehensive review of the housing market in a defined market area. At a minimum, market studies include a review of location, economic conditions, demographics, and existing and proposed housing stock. “When you buy real estate, you are buying a set of assumptions about the future”. From Dr. James Graaskamp Page 11 www.housingonline.com

12. What does a Market Study do? Depth and durability of the market Supply and demand analysis Marketability of proposed development Projected outcome - feasibility and conclusions Page 12 www.housingonline.com

13. What is a Market Study’s Purpose? A market study can be used to: Determine the demand for a specific proposed development Examine the overall condition of an area’s housing market. Measure the impact of a proposed development on an existing market Evaluate the appropriateness of a proposed development Page 13 www.housingonline.com

14. Market Studies –SCOPE Complete Market Study Comprehensive report addressing all items in NCHMA Model Content Standards Full Narrative or Summary report format. Something less than a market study Rent study Capture rate demand study Memos Other examples? Page 14 www.housingonline.com

15. Housing Market Issues Which Market Segment is Being Served Is the Development Appropriate Impact on Existing Market Other Issues Special Needs Population Preservation of Affordable Housing Page 15 www.housingonline.com

16. Typical Components of a Market Study include: Executive Summary Project Description Location and Market Area Definition Employment and Economy Demographic Characteristics Competitive Environment Analysis / Conclusions and Recommendations Local Perspectives of Rental Housing Market and Housing Alternatives Page 16 www.housingonline.com

17. Project Description (Information to Get Started) Proposed unit mix Proposed amenities Housing Consumer Detailed Location Construction / RehabilitationTimeline Plans and specs (if available) Any adverse influences in the area that are known by the developer Project Description & Site Analysis Page 17 www.housingonline.com

18. Site Analysis • Project Location • Project Analysis • Market Area Page 18 www.housingonline.com

19. Project Location City, State, and Exact Location are discussed in the narrative. Aerial Photo of area is obtained Bing.com Google Maps Others Map of Area is prepared Area Linkages are mapped Page 19 www.housingonline.com

20. Site Analysis Is the site appropriate for intended use? Compatible surrounding land uses? Neighborhood adequately served by facilities and services? Ingress and Egress? Adequate visibility? Any planned changes in the area that may compromise its suitability in the future? Page 20 www.housingonline.com

21. Site Plan Site characteristics are usually described by: Size, Shape, Zoning, Frontage, Topography, Vegetation, Visibility A typical site plan includes: Buildings, Parking, Ingress/Egress, Amenities, Landscaping, Setbacks Page 21 www.housingonline.com

22. Primary Market Area “A geographic area from which a property is expected to draw the majority of its residents.” Secondary Market Area “The portion of a market area that supplies additional support to an apartment property beyond that provided by the primary market area.” Determining Market Area Page 22 www.housingonline.com

23. A housing market area is the contiguous area within which households compete for available housing. Ask yourself if the market area delineated seems reasonable in size and character. Page 23 www.housingonline.com

24. Market Area Criteria A reasonable market area is critical as it determines the geographic scope of other analyses. It should be realistic in size. It should reflect the impact of natural and man-made barriers. Beware of radii, county boundaries, or multi-county boundaries. Seniors market areas are generally larger than those for family projects. Page 24 www.housingonline.com

25. Delineation of Market Area Location of Competitive Properties Accessibility Natural Boundaries Housing Project Characteristics Market Perceptions Commuting Patterns Target Market Jurisdictional Boundaries Local Agency Service Boundaries Non-Geographic Factors Page 25 www.housingonline.com

26. Is this a good market area? Page 26 www.housingonline.com

27. How about this market area? Page 27 www.housingonline.com

28. Does this seem reasonable? Page 28 www.housingonline.com

29. Economic Context • What is the environment in which project will be operating? • Labor Force • Unemployment • At Place Employment • Major Employers Page 29 www.housingonline.com

30. Unemployment Rate Source: US Bureau of Labor Statistics Page 30 www.housingonline.com

31. Change in Metro Area Employment Since Recession Began: % Jobs Page 31 www.housingonline.com

32. Change in Metro Area Employment Since Recession Began: # Jobs • www.housingonline.com Page 32

33. At-Place Employment Trends Page 33 www.housingonline.com

34. At-Place Employment by Sector Page 34 www.housingonline.com

35. Commuting Patterns Page 35 www.housingonline.com

36. Economic Forecast Location of Major Employers Page 36 www.housingonline.com

37. Sources for Data • Unemployment Data: http://data.bls.gov/pdq/querytool.jsp?survey=la • NAIC codes: • http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2007 • At Place Employment Data: http://data.bls.gov/pdq/querytool.jsp?survey=en Page 37 www.housingonline.com

38. Demographic Context • Demographic Trends • Sources of Data • Growth Projections • Population Characteristics Page 38 www.housingonline.com

39. Change 2000-2020; US Population by Age Page 39 www.housingonline.com

40. Projection Sources • Projections   • Metropolitan Planning Organizations www.narc.org • National vendors (Neilsen, ESRI) • Local Governments • State Data Centers • U.S. Census Bureau • C-40 report • 2010 Census • American Community Survey Page 40 www.housingonline.com

41. Factors Impacting Population and Household Projections Page 41 www.housingonline.com

42. Population and Household Trends Page 42 www.housingonline.com

43. Population and Household Trends • What is the nature of recent demographic trends in the market area? • Has the number of households been increasing, decreasing, or remaining about the same? • Are recent past trends expected to continue? • Are demographic projections from a reputable third-party source? • Does building permit activity correlate with household trends? • For seniors’ projects, trend of age-qualified households Page 43 www.housingonline.com

44. Age Distribution Page 44 www.housingonline.com

45. Household Type Page 45 www.housingonline.com

46. Trends in U.S. Rentership Rate Page 46 www.housingonline.com

47. Total Income Page 47 www.housingonline.com

48. Income by Tenure Page 48 www.housingonline.com

49. Questions? Page 49 www.housingonline.com

50. National Council of Housing Market Analysts Presents: Elements of Market Analysis, Part Two: Assessing the Market and Drawing Conclusions Kentucky Housing Conference October 9, 2013 Lexington, Kentucky