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雷达卡
1 December 2008
Rent or Buy?
California is correcting quickly,
Florida lags
Lou Taylor
Research Analyst
(+1) 203 863-2381
louis.taylor@db.com
Vin Chao
Research Associate
(+1) 212 250-6799
vincent.chao@db.com
Home prices drive the rent buy gap to Q1 2005 levels
The national rent-buy gap narrowed by 190 bps in Q3 to 74%. This is the highest
level since Q1 2005. The median home price was down 3.4% following the
seasonal up-tick in Q2. Year-over-year median prices are down 11.5% in the
markets we track. This is up from the 9.1% y-o-y decline at the end of Q2. Given
the collapsing economy and normal seasonal drop, we expect a 5-8% sequential
drop in Q4.
Deutsche Bank Securities Inc.
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
Industry Strategy
Top picks
American Campus Communities (ACC.N),USD22.39
AIMCO (AIV.N),USD11.47 Buy
AvalonBay Communities (AVB.N),USD60.67 Hold
BRE Properties, Inc. (BRE.N),USD29.36 Hold
Companies featured
American Campus Communities (ACC.N),USD22.39
2007A 2008E 2009E
FFO (USD) 1.00 1.17 1.40
P/FFO (x) 28.7 19.1 16.0
EV/EBITDA (x) 20.5 13.5 11.4
AIMCO (AIV.N),USD11.47 Buy
2007A 2008E 2009E
FFO (USD) 3.27 3.07 2.55
P/FFO (x) 15.2 3.7 4.5
EV/EBITDA (x) 23.1 14.1 11.3
AvalonBay Communities (AVB.N),USD60.67 Hold
2007A 2008E 2009E
FFO (USD) 4.61 4.91 4.70
P/FFO (x) 26.3 12.4 12.9
EV/EBITDA (x) 25.8 15.7 15.3
BRE Properties, Inc. (BRE.N),USD29.36 Hold
2007A 2008E 2009E
FFO (USD) 2.59 2.76 2.55
P/FFO (x) 22.2 10.6 11.5
EV/EBITDA (x) 18.8 14.1 15.2
Camden Property Trust (CPT.N),USD26.47 Sell
2007A 2008E 2009E
FFO (USD) 3.66 3.55 3.10
P/FFO (x) 17.9 7.5 8.5
EV/EBITDA (x) 20.3 14.3 15.9
Equity Residential (EQR.N),USD30.43 Hold
2007A 2008E 2009E
FFO (USD) 2.40 2.49 2.20
P/FFO (x) 18.7 12.2 13.8
EV/EBITDA (x) 17.6 14.5 15.3
Post Properties (PPS.N),USD15.68 Sell
2007A 2008E 2009E
FFO (USD) 2.00 0.79 1.50
P/FFO (x) 22.3 19.8 10.5
EV/EBITDA (x) 20.2 19.1 15.2
Global Markets Research Company
California markets are correcting quickly…
The overall improvement hides the dramatic changes in some markets. The rapid
pace of home price declines in California has effectively returned San Diego to the
rent-buy relationship and affordability of 1999. This is our theoretical “equilibrium”
year as the rent-buy gap and affordability were relatively stable during the 1990s.
Sacramento and San Bernardino are nearly at the 1999 levels. Los Angeles and
Orange County are not far behind.
…while Florida lags
The Florida markets are adjusting, but not as quickly as the California markets. The
cost to rent as a percentage of the cost to own is still well below the ratio in 1999.
Generally, the cost to rent is still 70-80% of the cost to own versus 100-110% in
the late 1990s. The cost to own a home relative to average household income is
close to the 1999 relationship in Jacksonville and Tampa. But in Miami, the cost to
own a home is 18% of average household income versus 13% in 1999. The peak
was 27.6% in Q4 2005. Orlando did not have the extremes of Miami. But the cost
to own relative to income is 15.3% versus the 10.7% in 1999.
If policy changes “work”, virtually all markets would reach 1999 relationship
We’ve prepared a “pro forma” Q4 2008 to reflect the sharp economic changes
the last two months. Home prices are at their seasonally weakest in Q4 plus the
economy has virtually stopped. Mortgage rates were little changed until the
Federal Reserve announced its $800 bn asset purchase last week which drove
mortgage rates down. Our pro forma assumes a 10% drop in home prices across
the board plus a 100 bp drop in mortgage rates. If these two events occur
together, the rent-buy relationship and home affordability would return to 1999
levels, our loosely defined “equilibrium level.
Markets could overshoot
Our “pro forma” is simply an arithmetic calculation. It ignores a host of factors
that could influence the equation. These include the potential failure of the policy
initiatives, the impact of tighter mortgage standards and the negative implications
from rising unemployment. In short, markets could overshoot.
Rent-buy gap resumes its
steady contraction
Gap is back to the Q1 2005 level
Home prices remain the sole driver. The national rent-buy gap narrowed by 190 bps in Q3
to 74%. This is the highest level since Q1 2005 (see Figure 1). The median home price was
down 3.4% following the seasonal up-tick in Q2. Year-over-year median prices are down
11.5% in the markets we track. This is up from the 9.1% y-o-y decline at the end of Q2.
Given the collapsing economy and normal seasonal drop, we expect a 5-8% sequential drop
in Q4.
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