© 2016 RealPage Inc. Apartment Market Update: Greg Willett May 12, 2016 Everything’s Still OK, Right?

© 2016 RealPage Inc. Tailwinds that support strong apartment demand remain in place Monthly job production in 2016 is averaging 192k positions for the initial four months of the year. That’s slightly behind figures, but still healthy. Most additions are of solid quality, in industries that pay substantial wages. The home ownership rate stood at 63.5% as of Q1 2016, compared to its 69.2% peak. The share of purchases from first-timers remains low, way under the historical norm.

© 2016 RealPage Inc. However, if you want to panic about something, there’s quite an assortment of options for you  The stock market’s volatility obviously is not a good thing.  China! Energy! Climate Change! Terrorism!  Election time always leads to an increase in political uncertainty, and that’s particularly the case in this round. (Yes, there is a route where a “disrupter” wins.)  Investment returns are cooling in absolute terms and relative to results for other types of real estate.  Construction tops the volumes many have seen to date in their careers.  Rent growth continues to top wage growth.

© 2016 RealPage Inc. General uncertainty appears to have dampened Q1 household formation  Apartment demand for 33.5k units across the top 100 markets fell under the norm of 40k to 50k units routine for Q1 in this economic cycle. (We were about out of desirable units when the small demand number was posted in early 2013.)  That apartment demand tally for early 2016 looks really weak when compared to the new supply sum of 59.5k.  The home sales numbers also are falling short of expectations so far this year.

© 2016 RealPage Inc. Weak Q1 demand hasn’t done meaningful damage in the big picture annual completions annual demand U.S. data is based on the 100 metros that form the core of MPF Research’s coverage

© 2016 RealPage Inc. U.S. apartment occupancy has been essentially full for quite some time, and is still near record levels overall occupancy U.S. data is based on the 100 metros that form the core of MPF Research’s coverage

© 2016 RealPage Inc. Rent growth remains robust, especially since we’re deep into this economic/market performance cycle U.S. data is based on the 100 metros that form the core of MPF Research’s coverage 19 quarters averaging 2.8%23 quarters averaging 3.8%

© 2016 RealPage Inc. But don’t get carried away with the story that “rent growth is huge everywhere” MarketAnnual Rent Growth 50 Largest Metros5.2% Next 50 Metros3.4% MarketAnnual Rent Growth West Region7.1% South Region4.3% Midwest Region3.5% Northeast Region3.2% Figures based on year-over-year change in same-store effective rents for new leases

© 2016 RealPage Inc. Ongoing construction is substantial, with deliveries scheduled to peak for the cycle this year U.S. data is based on the 100 metros that form the core of MPF Research’s coverage, minus New York Early 2016 did bring the first real signal of a slowdown in starts

© 2016 RealPage Inc. The near-term outlook appears favorable, though not quite as hot as recent results  Primarily because of more product moving through initial lease-up at any given point in time, look for occupancy to drift down just a little in  Still, the rate should remain healthy in the big picture, continuing to top 95%.

© 2016 RealPage Inc. The near-term outlook appears favorable, though not quite as hot as recent results  Similarly, annual rent growth probably is near its peak for this market cycle right now. But the outlook is still very healthy.  From today’s annual growth pace of roughly 5%, look for a year-over-year rent increase near 4% at the end of calendar 2016 and on into  The comparison point there is rent growth averaging 2.5% to 3% annually over the course of the past two decades.

© 2016 RealPage Inc. Thanks! MPF Research, a division of RealPage, Inc.