RealPage® MPF Research Apartment Market Reports Show Slowing in Rent Growth for the U.S. in 2012

  RealPage® MPF Research Apartment Market Reports Show Slowing in Rent Growth
  for the U.S. in 2012

    While down from 2011’s result, 2012’s 3.0 percent increase topped the
          long-term norm; completions will jump notably in 2013-2014

Business Wire

CARROLLTON, Texas -- January 3, 2013

Effective rents for new leases in the U.S. apartment sector climbed 3.0
percent during 2012, according to MPF Research, an industry-leading market
intelligence division of RealPage, Inc. (NASDAQ: RP). The annual rent growth
pace slowed throughout the year, after the rate of increase reached 4.8
percent in 2011. MPF Research analysts highlight the nation’s latest apartment
rent growth statistics as well as other key performance indicators that
include a big jump in the number of units that will be delivered over the
course of the near term in a discussion found at

Rent growth over the past year remained a bit above the long-term norm of 2.5
percent recorded during the past two decades. An increase of 3.0 percent is
similar to the average results posted during past periods when occupancy was
sustained at strong and generally stable levels, according to MPF Research.
Comparable annual price increases registered most recently from 2005 through
the middle of 2008, and before that in the middle to late 1990s.

While U.S. apartment rents declined on average by a little more than 4 percent
during the recession, they now have been moving upward for three full years.
Late 2012 pricing topped the rates recorded in late 2009 by 10.5 percent.

“Property owners and operators generally aren’t pushing rents quite as hard as
they were a year or so ago,” said Greg Willett, MPF Research vice president.
“Many on the operations side of the apartment industry have focused on
sustaining their very tight occupancy levels during a period when job growth
and new household formation have been fairly sluggish at the same time that
renter movement has begun to inch up from the unusually low levels experienced
in the previous few years.”

More renter movement in the apartment sector mainly reflects households opting
for one apartment over another, according to the MPF Research analysis. Loss
of renters to purchase in the now-improving for-sale housing market is having
only a very small impact on apartment sector fundamentals, the firm’s research
shows. “While the number of apartment renters opting to buy is rising a
little, it remains far below the levels apartment operators were accustomed to
prior to the recession,” Willett said. “Families that have been renting
single-family homes, rather than apartments, comprise a big portion of the
first wave of homebuyers seen in the cycle. By far the biggest component of
the apartment resident base, particularly within large urban areas, consists
of young singles living alone or young-couple households. Single-family homes
just aren’t the right housing option for many of them, regardless of shifts in
the pricing relationship.”

Locations experiencing the biggest jumps in the loss of apartment renters to
purchase, in fact, tend to be places where the apartment sector’s overall
performance is running above the national norm. The MPF Research analysts cite
Texas, the Carolinas, Nashville and Denver as key examples. “The most
pronounced comebacks in the for-sale housing market are seen in spots where
the overall economy is doing the best,” according to Willett. “That means job
additions and new household creation volumes are strong enough to quickly
replace any apartment renters lost to purchase. The locations where people are
buying homes are the same locations where recent college graduates are getting
jobs and young adults who have been at home with their parents are now able to
move out and live on their own.”

Average occupancy of 94.9 percent registered in U.S. apartments at the end of
2012, up a tiny bit from the reading of 94.7 percent recorded at the end of
2011. End-of-year occupancy backtracked from the third quarter level of 95.4
percent, reflecting normal seasonality in the performance. When the nation’s
apartment occupancy rate bottomed during the recession, the late 2009 figure
was 92 percent.

Demand for 112,900 apartments was posted across the country’s 100 largest
metros in 2012, according to the MPF Research data. That product absorption
figure mildly surpassed completions totaling 91,500 units but was a little
less than half of 2011’s demand total and just a bit more than a third of
2010’s unusually strong absorption result.

“It’s not a coincidence that demand eased to levels near the delivery numbers
in 2012 for the nation as a whole and across most individual metros,” Willett
said. “With the existing stock basically full almost everywhere, the only net
absorption of units that could occur in many areas was limited to the demand
that came from getting still-limited new supply through the initial lease-up

Among large individual metros, the three Bay Area markets of San Francisco,
San Jose and Oakland ranked as the country’s rent growth leaders in 2012.
Effective prices for new leases jumped an even 8.0 percent in San Francisco,
while upturns proved nearly as strong at 7.7 percent in San Jose and 7.1
percent in Oakland.

With pricing up 5.9 percent, the Denver-Boulder area was the nation’s
next-best performer, followed by Nashville and New York which each saw rents
jump 5.1 percent. Rents climbed 4.8 percent in Houston, 4.6 percent in
Charlotte, 4.4 percent in Portland, and 4.3 percent in Seattle-Tacoma.

Rent Growth Leaders in 2012

Rank                  Metro                        Growth
1                     San Francisco                8.0%
2                     San Jose                     7.7%
3                     Oakland                      7.1%
4                     Denver-Boulder               5.9%
5 (tie)               Nashville                    5.1%
5 (tie)               New York                     5.1%
7                     Houston                      4.8%
8                     Charlotte                    4.6%
9                     Portland                     4.4%
10                    Seattle-Tacoma               4.3%

Markets just missing the cut-off point to rank as top 10 rent growth
performers were Detroit, West Palm Beach, Austin and Orange County. Pricing
rose 3.7 to 4.1 percent in each of those locales.

Las Vegas was the country’s sole large market that completely missed out on
rent growth in 2012, as prices were cut 1.7 percent. Sizable spots with rent
change barely in positive territory were Virginia Beach-Norfolk, New Orleans,
Riverside-San Bernardino and Atlanta.

While apartment deliveries in 2012 remained fairly limited by past standards,
construction starts did accelerate rapidly throughout the course of the year.
The number of apartments under construction at the end of 2012 climbed to
224,000 units across the nation’s 100 largest metros. Some 149,800 of those
units are in properties where building is scheduled to wrap up in 2013. The
number of units under construction now nearly matches the historical norm
maintained from the mid-1990s to 2008. However, the distribution of the future
supply is far different from the typical pattern, according to the MPF
Research analysis.

  *Markets across Florida plus Atlanta, Phoenix, Las Vegas and Riverside-San
    Bernardino haven’t fully recovered from the downturns experienced during
    the recession. Thus, building remains appropriately restrained and well
    below historical norms in those locales. Those markets, which accounted
    for just over a fourth of all apartment construction that occurred in the
    nation’s top 100 metros prior to the recession, now represent just 13
    percent of ongoing building.
  *It’s largely business-as-usual in the nation’s comparatively fast-growing
    economies where barriers to construction traditionally have been moderate
    to minimal. Building activity is very similar to pre-recession norms
    across most spots in Texas, the Carolinas, Tennessee and Denver.
  *Very early in the cycle, developers pounced on quite a few places
    traditionally thought of as the nation’s most difficult building
    environments, so near-term completions now are scheduled to come in at
    levels well above the historical norms in places such as New York, the
    Washington, D.C. area, San Francisco, San Jose, Orange County and the
    urban cores of Seattle, Chicago and Boston.

Looking beyond what’s under construction now, the backlog of projects in the
planning stages is very large, according to the MPF Research analysis. “It
wouldn’t be surprising to see starts come in at 250,000 or more units in the
country’s biggest metros during 2013,” Willett said. “By the end of this year
then, ongoing construction, inclusive of the 74,000 or so units now underway
that won’t finish until 2014, probably will be getting close to the high-water
mark posted during the past couple of decades.” That earlier cyclical peak was
357,000 units under construction across the nation’s 100 largest markets as of
late 1999.

Although MPF Research has some concerns about a brief supply-related bump in
the road for the apartment market’s performance during 2014 and perhaps 2015,
look for 2013’s performance to prove similar to the 2012 results. “Most places
are starved for new product right now, so properties that will complete over
the coming year appear likely to do incredibly well, generally without hurting
the results for the existing stock,” Willett said. Just having product moving
through initial lease-up will translate to a tiny slide in overall occupancy,
but the market should remain essentially full.

The firm expects rent growth to again register at about 3 percent, with the
potential there that the number could prove a bit higher. “Operator attitudes
will influence the final number,” Willett said. “Increasing deliveries will
stimulate more leasing activity, and an upturn in the number of people coming
through the front door can trigger more confidence on the part of property
managers, even if overall occupancy rate isn’t moving in a meaningful way.
Also, even the moderately stronger job growth volumes that most leading
economists are anticipating during the second half of the year could help
alleviate the uncertainty about future demand prospects that some apartment
operators exhibited when setting prices over the past year.”

About RealPage

Located in Carrollton, Texas, a suburb of Dallas, RealPage provides on-demand
(also referred to as “Software-as-a-Service” or “SaaS”) products and services
to apartment communities and single family rentals across the United States.
Its on-demand product lines include OneSite® property management systems that
automate the leasing, renting, management and accounting of conventional,
affordable, tax credit, student living, senior living and military housing
properties; LeaseStar™ multichannel managed marketing that enables owners to
originate, syndicate, manage and capture leads more effectively and at less
overall cost; YieldStar® asset optimization systems that enable owners and
managers to optimize rents to achieve the overall highest yield, or
combination of rent and occupancy, at each property; Velocity™ billing and
utility management services that increase collections and reduce
delinquencies; LeasingDesk® risk mitigation systems that are designed to
reduce a community’s exposure to risk and liability; OpsTechnology® spend
management systems that help owners manage and control operating expenses; and
Compliance Depot™ vendor management and qualification services to assist a
community in managing its compliance vendor program. Supporting this family of
SaaS products is a suite of shared cloud services including electronic
payments, document management, decision support and learning. RealPage’s
MyNewPlace® subsidiary is one of the largest lead generation apartment and
home rental websites, offering apartment owners and managers qualified,
prospective residents through subscription, pay-per-lead and LeaseMatch^TM
pay-per-lease programs. Through its Propertyware subsidiary, RealPage also
provides software and services to single-family rentals and low density,
centrally-managed multifamily housing. For more information, call
1-87-REALPAGE or visit


Greg Willett, 972-820-3262
Investor Relations
Rhett Butler, 972-820-3773
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