Section 2 • Economics & Demographics
are enticing workers from outside the region. Many of the newly employed live in small apartments, creating demand for self- storage space. Major technology job engines in the Seattle and the California Bay Area are drawing workers to fill open posi- tions. However, housing costs are high and apartments are often cramped, leading to a need for self-storage space. A recovering housing market is supporting demand in the
Sun Belt. As retirees sell their homes in the Northeast and Mid- west, they are renting storage units in destination cities to tem- porarily hold household items.
The four publicly traded REITs rode the
wave of a rising stock market, recording stock price gains from 12 percent to over 27 percent between
the fourth quarter of 2013 and the same period of 2014.
Consumer Spending Climbs Consumer confidence and spending habits gained momen- tum in 2014 following a subdued 2013. Consumer spending in the U.S. rebounded in August as further job gains encouraged households to loosen their purse strings, Commerce Depart- ment figures showed. Worker pay over a 12-month period showed its biggest gains
since 2012. The pickup in spending that accounts for almost 70 percent of the economy will help put the expansion on firmer footing as the housing market shows signs of fatigue. The U.S. Bureau of Labor Statistics reported 2013 spend-
ing decreased 0.7 percent, following an increase of 3.5 percent in 2012. Consumer confidence retreated in September after four
consecutive months of improvement. Heading into the fourth quarter, consumers were less confident about the short-term outlook for the economy and labor market, and somewhat mixed regarding their future earnings potential. The Conference Board Consumer Confidence Index stood at
86.0 (1985=100) in September. The Index reached 93.4 in August and was at 77.5 at the end of 2013.
Home Sales Lose Momentum The housing market slowly regained its footing in 2014, but not with the same vigor as in 2013. Sales of existing homes were sluggish as the year end approached, but sales prices were on the uptick. After four consecutive months of gains, existing-home sales
slipped in August before moving back to a one-year high in Sep- tember, according to the National Association of Realtors. NAR said existing home sales increased to an annual rate of 5.17 mil- lion units, the strongest reading since the previous September. Still, sales were 1.7 percent below those for September 2013.
40 Self-Storage Almanac 2015
Existing-home sales are completed transactions that include sin- gle-family homes, townhomes, condominiums, and co-ops. The housing recovery continued to move along sluggishly,
as consumers found themselves stuck between tight credit stan- dards and limited wage growth. Following a run-up in mortgage rates during the second half of 2013, the 30-year mortgage rate leveled off early in the year, eventually falling below 4 percent in October. As investors retreated from the market during the summer,
first-time buyers had a better chance of purchasing a home since the bidding wars receded and supply constraints significantly eased in many parts of the country. First-time homeowners rep- resent less than 30 percent of all buyers. NAR said with solid job growth, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying. The median existing-home price for all housing types in Au-
gust was $219,800, which was 4.8 percent above August 2013. This marked the 30th consecutive month of year-over-year price gains. Distressed homes—foreclosures and short sales—represent-
ed 8 percent of August sales, down from 12 percent a year earlier. According to data released by real estate data firm, Core Logic, approximately 648,000 homes in the United States were stuck in some stage of the foreclosure process at mid-year. This figure is down from 1 million in June 2013, a 35 percent decrease. Sales of new, single-family houses in August were at a season-
ally adjusted annual rate of 504,000, according to estimates by the U.S. Census Bureau and the Department of Housing and Ur- ban Development. This was 33 percent above the August 2013 es- timate. The median sales price of new houses sold in August was $275,600, compared to a median price of $220,600 for existing single-family homes in August, up 5.2 percent from August 2013.
A New Wave Of Investors The industry’s relatively stable performance during the recession has attracted a host of new investors to the industry and this has produced a very competitive investment market. Not only have the Real Estate Investment Trusts (REITs) been active buyers but investment groups that independently raised capital have en- tered the market as well. The industry fared so well through the recession that now
self-storage has a stamp of approval as a safe harbor for some investors. Capital is flooding into the industry. That’s creating cap rate compression, which drives value up, according to Santa Monica, Calif.-based William Warren Group. The four publicly traded REITs rode the wave of a rising stock
market, recording stock price gains from 12 percent to over 27 percent between the fourth quarter of 2013 and the same period of 2014. All four REITs reported occupancy levels at mid-year of at least 91 percent, according to MJ Partners Real Estate Services. Public Storage achieved the highest occupancy, 94.7 percent in the second quarter, while Sovran’s Uncle Bob’s Self Storage brand showed the largest year-over-year occupancy gain, improving from 88.3 percent to 91 percent.
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