Good morning, and thank you, and welcome to the Camden Property Trust third quarter 2020 earnings conference call. All participants would be in listen only mode. Should you need assistants, please signal the conference specialist by pressing the star key followed by zero. After today presentation there will be an opportunity to ask questions. To ask a question you may press star and then one on touchtone phone. To withdraw your question please press star then two. Please note that this even is been recorded . I would now like to turn the conference over to Kim Callahan. Please go ahead.
Good morning, and thank you for joining Camden's third quarter 2020 earnings conference call. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC. We encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete third quarter 2020 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on the call.
Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman; and Alex Jessett, Chief Financial Officer. We will attempt to complete our call within one hour, as we know another multifamily company is holding their call right after us. We already have 15 analysts in the queue right now, so please limit your questions to two. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email after the call concludes. At this time, I'll turn the call over to Ric Campo.
Thanks, Kim. Our on-hold music today was a tribute to Team Camden. We wanted to celebrate the incredible results of our on-site team, supported by our regional and corporate staff, that they have achieved throughout the COVID storm. Despite all the turmoil, Team Camden never stopped taking care of business. That's what you can expect from a team of all-stars. Instead of 1,000-yard stare, Team Camden showed up every day with the eye of the tiger, reminding us of what we know is true, you're simply the best. This evening, we will join you in spirit as you all raise your glass to celebrate your remarkable performance. Cheers. Our performance for the third quarter was driven by our team, but was also aided by our Camden brand equity and our capital allocation and market selection.
We've always believed that geographic and product diversification would lower the volatility of our earnings. We are in markets that are pro-business, have an educated workforce, low cost of housing, and high quality-of-life scores. These attributes drive population and employment growth, which drives housing demand. The only exception to this market generalization for us is Southern California. Compared to most other parts of California, however, our properties are in the most business-friendly cities and areas in the state. Our markets have lost fewer high-paying jobs than other markets in the U.S. As a matter of fact, it's 5% losses for Camden versus 15% for the U.S. Overall, year-over-year employment losses through September have been less in our markets. Job losses in most of our markets have been in the range of down 2.5% to down 5%. The best being Austin, Dallas, Phoenix, Tampa, Atlanta, and Houston.
Toughest markets have been Orlando, Los Angeles, and Orange County, with job losses between 9.5% and 9.7%. Other key employment trends that are supporting our residents' ability to stay in their apartments and pay rent is that when you think about the job losses that we lost at the beginning of the pandemic, there were 22 million jobs lost, 11 million have been added back. Of the jobs that have not been added back, 5.8 million are low-income workers making less than $46,000 a year. Another group, 4.1 million folks have not been added back that make between $46,000 and $71,000 a year. The lion's share of the 11 million jobs that have not been added back are really not our residents. They're lower-income workers that do not live at Camden. Most of our residents have higher income than that.
It's unfortunate that we have that many job losses, and we obviously need to add those jobs back as soon as possible, but they aren't negatively impacting Camden's resident base. Again, I want to thank our Team Camden for delivering living excellence to all of our residents, and I'll turn the call over to Keith Oden, our Executive Vice Chairman.
Thanks, Ric. I'll keep my remarks brief today so that we can get to as many of your questions as possible. Obviously, we're more than pleased with our results for the quarter. This is certainly the kind of performance that is worthy of celebration by Team Camden. Overall, things seem like they're getting back to something closer to normal, and that's quite a contrast to where we were in April and May of this year. A few signs that conditions have stabilized in our markets. Occupancy for the third quarter was 95.6%, up from 95.2% in the second quarter. Several of our communities are actually exceeding their original budget for occupancy. Turnover continues to be a tailwind at 48% for the third quarter and only 42% year to date.
There continues to be a lot of anecdotal evidence that home sales are spiking. In our portfolio, we had 13.8% move-outs to purchase homes in the first quarter of this year. That moved up to 14.7% in the second quarter, and in the third quarter it moved up again to 15.8%. If you take the average year-to-date move-outs to purchase homes, it's 14.8% versus a full year 2019 of 14.6%. Really, very little change year-over-year. We did see a little uptick in October to 18%, but Q4 is always a little bit elevated. Clearly, this is a stat that bears some watching to see if the anecdotal evidence starts showing up in the stats. Thanks to all, Camden, for a remarkable year so far. Everybody keep your rally caps on for the rest of the year, and I'll turn the call over to Alex Jessett.
Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the third quarter of 2020, we stabilized Camden North End I, a 441-unit, $99 million new development in Phoenix, Arizona, generating over a 7% stabilized yield. We completed construction on Camden Downtown, a 271-unit, $131 million new development in Houston. We recommenced construction on Camden Atlantic, a 269-unit, $100 million new development in Plantation, Florida. We began construction on both Camden Tempe II, a 397-unit, $115 million new development in Tempe, Arizona, and Camden NoDa, a 387-unit, $105 million new development in Charlotte. For the third quarter of 2020, effective new leases were down 2.4%, and effective renewals were up 0.6%, for a blended decline of 0.9%.
Our October effective lease results indicate a 3.5% decline for new leases and a 2.1% growth for renewals, for a blended decrease of 1%. Occupancy averaged 95.6% during the third quarter of 2020, and this was up from the 95.2% we both experienced in the second quarter of 2020, and that we anticipated for the third quarter of 2020, leading in part to our third quarter operating outperformance, which I will discuss later. We continue to have great success in conducting alternative method property tours for prospective residents and retaining many of our existing residents with actually a slight acceleration in total leasing activity year-over-year. In the third quarter, we averaged 3,227 signed leases monthly in our same property portfolio, slightly ahead of the third quarter of 2019, when we averaged 3,104 signed leases. To date, October 2020 total signed leasing activity is on pace with October 2019.
Our third quarter collections far exceeded our expectations as we collected 99.4% of our scheduled rents with only 0.6% delinquent. This compares favorably to both the third quarter of 2019, when we collected 98.3% of our scheduled rents with a higher 1.7% delinquency, and the second quarter of 2020, when we collected 97.7% of our scheduled rents with 1.1% of our residents in a deferred rent arrangement and 1.2% delinquent. The fourth quarter is off to a good start with 98.1% of our October 2020 scheduled rents collected. Turning to bad debt. In accordance with GAAP, certain uncollected rent is recognized by us as income in the current month. We then evaluate this uncollected rent and establish what we believe to be an appropriate bad debt reserve, which serves as a corresponding offset to property revenues in the same period.
When a resident moves out owing us money, we typically have previously reserved 100% of the amount owed as bad debt, and there will be no future impact to the income statement. We reevaluate our bad debt reserves monthly for collectability. Turning to financial results. Last night, we reported Funds from operations for the third quarter of 2020 of $126.6 million, or $1.25 per share, exceeding the midpoint of our prior guidance range by $0.08 per share. This $0.08 per share outperformance for the third quarter resulted primarily from approximately $0.055 in higher same store revenue, comprised of $0.025 from lower than anticipated net bad debt due to the previously mentioned higher than anticipated collection levels and higher net reletting income.
$0.01 from the higher than anticipated levels of occupancy, and $0.02 from higher than anticipated Other Income driven primarily from our higher than anticipated levels of leasing activity. Approximately $0.005 in better-than-anticipated revenue results from our non-same store and development communities. Approximately $0.005 in lower overhead due to general cost control measures and an approximate $0.015 gain related to the sale of our Chirp Technology investment to a third party. This gain is recorded in Other Income. We have updated our 2020 full year same store revenue, expense, and Net Operating Income guidance based upon our year-to-date operating performance and our expectations for the fourth quarter. At the midpoint, we now anticipate full year 2020 same store revenue to increase 1% and expenses to increase 3.4%. Resulting in an anticipated 2020 same-store Net Operating Income decline of 0.3%.
The difference between our anticipated 3.4% full-year total expense growth and our year-to-date total expense growth of 2.4% is primarily driven by the timing of current and prior year tax refunds and accruals. The increase to our original full-year expense growth assumption of 3% is almost entirely driven by higher than anticipated property tax valuations in Houston. We now anticipate total same-store property taxes will increase by 4.7% in 2020 as compared to our original budget of 3%. Last night, we also provided earnings guidance for the fourth quarter of 2020. We expect FFO per share for the fourth quarter to be within the range of $1.21-$1.27. The midpoint of $1.24 is in line with our third quarter results after excluding the previously mentioned third quarter gain on sale of technology.
Our normal third to fourth quarter seasonal declines in utility, repair and maintenance, unit turnover, and personnel expenses are anticipated to be entirely offset by the timing of property tax refunds, lower net market rents, and our normal seasonal reduction in occupancy and corresponding other income. As of today, we have just under $1.4 billion of liquidity, comprised of approximately $450 million in cash and cash equivalents, and no amounts outstanding underneath our $900 million unsecured credit facility. At quarter end, we had $384 million left to spend over the next three years under our existing development pipeline, and we have no scheduled debt maturities until 2022. Our current excess cash is invested with various banks, earning approximately 30 basis points. At this time, we'll open the call up to questions.
We will now begin a question and answer session. To ask a question you may press star then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key. To withdraw your question please press star then two. At this time we will pause momentarily to assemble the roster. Our first question comes from Nick Yulico with Scotiabank. Please go ahead.
Hi, good morning guys. This is Sumit Sharma here in for Nick. Thank you for taking my question. The last quarter you guys played The Doors, and two quarters ago it was a Led Zeppelin cover, very strong picks, both of them actually. Today's hold music, as you mentioned earlier, was "The Eye of the Tiger." I'm thinking you guys are feeling better. It's kind of my obligation to ask you, but what factors or risks could actually change your optimism looking ahead in terms of collections and market dynamics?
I think it's all about reopening the economy. Obviously, what would worry us today is 33 states spiking with coronavirus, and we heard this morning on the news that El Paso was thinking about a shutdown. Ultimately, I don't think anything works in the economy, whether it's apartments or any other business, if you don't have employment and you don't have the economy working going forward. What would concern me would clearly be a go back to a middle of March shutdown. If that happens in America, then all bets are off again on everything, I think.
Yeah, I would just add to that policy-driven mandates regarding the ability of landlords to control the destiny of their real estate, similar to the CDC mandate. If you start seeing those types of mandates at the national level that continue to push out the ability for landlords to get control of their real estate through the eviction processes. That needs to come to a positive ending in terms of allowing landlords to get control of their destiny and their real estate. I would add that to Ric's point about getting the economy open again. Those two things would probably be at the top of my list.
Great. If you guys could sort of comment on Camden Downtown I in Houston. I know it's 39% leased, but it's in the market that you saw the largest year-over-year and sequential occupancy drop. I'm just trying to understand whether newer apartments are easier to lease, as we've heard from other markets, or is there some of the factors that could drive optimism for the project? I think you have Downtown II in the pipeline, so I know it's probably for a prospective start, but just wondering what could sort of change the equation on that particular asset.
Sure. Houston, I think in general, I'm going to talk about Houston. I think most markets in America, maybe ex California, most of our markets are experiencing supply and demand fundamentals.
The way they were pre-pandemic. There's definitely a pandemic kind of overlay, but Houston was a soft market going into the pandemic. If you think about the energy business in 2019, the energy business was not that great. The beginning of sort of third quarter of 2018, oil went from $70 a barrel to under $40 a barrel at the beginning of 2019. Energy wasn't really recovering. What was going on is you had Houston was kind of the only market in America in 2017 that had actually a decline in supply. Of course, what productive merchant builders do is they build their pipelines up, and Houston now has a lot of new development that's coming online. What's driving the Houston market today is definitely some weakness because of coronavirus, but generally speaking, Houston's actually fared pretty well.
We're down year-over-year 5% in terms of job growth. We've lost 300,000 jobs and added about half of those back, which is pretty amazing. We're at about 150,000 jobs lost. I'm actually very encouraged by the downtown lease-up because we're leasing about seven to 10 units a month there. In normal lease-up, you'd lease 30 units a month. Given that downtown office occupancy is about 15% right now, it's actually doing really well. I think there are a couple of pieces to that equation. I think a lot of people forget that urban properties or downtown properties like in Houston or Atlanta or Dallas or Charlotte are not the same as downtown New York or San Francisco or mostly the southern cities and cities that are less dense than some of the challenges that are happening in San Francisco, New York.
They're just not the same. Our urban is very different than urban in some of the other markets that people think about. Ultimately, our second phase is definitely there, but we're not going to start it anytime soon given the supply and demand pickup. I think downtown will continue to be really good over a long period of time. We're definitely going to be challenged in terms of achieving our original pro forma on this project during the pandemic, as we would be with any property today that's in lease-up. With that said, I think the fact that it's 39% leased is really good. We did have a WhyHotel in there to start with, and of course, given the pandemic, the WhyHotel doesn't make sense in a hospitality side of the equation today.
Thank you so much.
Our next question will come from Alua Askarbek with Bank of America. Please go ahead.
Hi, everyone. Thank you for taking the questions today. Congrats on a great quarter.
Thank you.
To start off, just thinking more about the leasing activity as well. Big picture, are you starting to see a slowdown in any particular markets or across the board in your Sun Belt markets as we head into the quieter months? Do you still see a lot of demand and especially a lot more demand of move-ins from out of state and out of the area, like the Northeast and West Coast?
Yeah, we definitely are seeing in-migration, but that's been going on for the last decade from northern markets and from California to some of our markets. Clearly, it's ramped up during the pandemic, but that's a trend that's been in place for a long time. In terms of overall traffic, our traffic numbers are down year-over-year, low double digits, like 12% down in total traffic. The interesting thing is that the traffic that we do get is much more motivated. Our closing rates are higher. We've intentionally dialed back on some of our internet spend because we're at almost 96% occupied now, and the traffic that we do get is very motivated. While traffic is down overall, we still see more than enough traffic to maintain our occupancy where it is right now. It's always going to slow down in the fourth quarter.
We'll start seeing that as we get particularly into the holiday season. Traffic falls off, that's okay with the way our portfolio is structured with our lack of leases that roll over during that period of time. We don't need that much traffic. Overall, I would say that the traffic feels pretty normal across our entire portfolio. The chat where we do have challenges are where, as Ric mentioned, we've just got a ton of new supply that's coming on. I would say outside of Houston and maybe South Florida, all of the places where we experience some weakness are related to supply that's coming on in most of the last cycle. The heaviest dose of supply was in the urban markets and urban infill, where we have communities that are directly affected by other merchant builder lease-ups. That's where our challenge is.
Got it. Just thinking about the renewal rates. I see that rates are going up in October. Do you expect them to keep going up? kind of like, what are you guys sending out in November and December for the renewals?
Yeah. We said when we voluntarily put renewal increases on hold for about three months, we felt like at some point when we got back to normal traffic levels, normal operating conditions in terms of being able to take care of our residents and take care of our new customers, that we think we'll trend back to where we were pre-COVID. We were pre-COVID across the portfolio. We were in the 3.5%-4.5% range on renewals. We think we're headed back there, and maybe it's in the first quarter of next year. We think that we're headed back to that more normal-looking level of renewals. We're at a little better than 2% now.
I would expect to see that continue to tick up as we just started back sending out renewals in all of our markets, and I think we had everyone back to kind of normal order in September. I think that'll continue to tick up, and we should get back to roughly where we were pre-COVID.
Got it. Thank you.
You bet.
Our next question will come from Nick Joseph with Citi. Please go ahead.
Thanks. I appreciate all the operating comments, and it being closer to normal. Just for those markets that do remain a little weak, what are you seeing in terms of concessions, either in your portfolio or the market on stabilized properties? Not on development, but on stabilized properties.
Nick, other than in our development communities, which is just more of a historical norm where you offer a month free rent of a concession, we don't really do concessions in our portfolio. We're on net pricing, and we're driven completely by our YieldStar revenue management system. We have very few overrides to the recommendations within the YieldStar system. I know the term effective rent has become much more prevalent because we do see our competitors going back to the use of concessions. I suspect even the competitors that are using YieldStar as their primary pricing mechanism, if you're sort of in a panic mode and YieldStar is telling you to gradually toggle back rents, but you're at 85% occupancy, a lot of people just don't have the tolerance and the patience to let YieldStar or any other revenue management system make those decisions.
You end up with people who take the YieldStar recommendation and then do a month free rent. We definitely see that. There's no question about it, but it's just not something that we do, and it's not something that we intend to do.
Thanks.
So you're not going to see-
Sorry, go ahead.
You're not going to see us start talking about effective rents. What we show you as pricing is what our leases are being signed at.
There's no disadvantage from a marketing perspective if the property next door, even if on a net effective basis, you're at the same point, if someone sees kind of a month free rent or two months free rent, you don't see any difference from a marketing perspective?
We don't. The reason we don't is that our marketing teams are trained to sell features and benefits, and customers know what the net rent is, right? If the market is down two months free, so that's a huge discount in the rent, and at the end of the day, you're just creating a financing mechanism for the resident. They know what their effective rent is during their lease term, and you're just creating a mechanism for them to get upfront free rent. If the overall market is two months free, then our effective rents are going to come down. They're not. It's kind of one-off. We don't think of it as a negative competitive situation for us at all, and our people know how to sell through it.
It's just a fundamentally bad business practice in a world where people can move in and then sort of file a CDC declaration and then sort of get their rent deferred. If you start off with two months free and offering them that incentive to move into your community, you may end up with two months free and then a CDC declaration beyond that. It's just a bad business practice. Honestly, it's mostly merchant builders, they open a community, and they're 30% occupied, and they're trying to get to the finish line, and they do what they have to do.
Yeah. Thank you.
You bet.
Our next question will come from Alexander Goldfarb with Piper Sandler. Please go ahead.
Hey, good morning. Morning down there.
Good morning.
Hey, just following up on Nick's question, just so I'm clear, because a lot of your peers talked about at the extreme two months free, then sort of going from there. Across all your markets, including Southern Cal and D.C., it sounds like you guys really aren't, either you're not seeing much free rent competition or whatever free rent is in the market just really isn't material or impactful to you. Is that the takeaway?
Yeah, I wouldn't say it's not impactful. I would just say that it's factored into our YieldStar net pricing. Like Ric said, if you've got six communities in lease up that are directly competitive with you, and they're all given two months free rent, the market clearing price for our community, our rents is going to go down. Obviously, that's reflected. You see in some of these markets, in Southern California market, we've had to reduce our rental rates, or YieldStar has recommended reducing rental rates across the board. I would say it's not a meaningful, in terms of overall experience in our portfolio. Alex, if you think about the third quarter, we had, of our 14 markets, we had 10 of those markets that actually had higher revenues than the third quarter of last year. Orlando was basically flat, and we had two that were down.
The overall picture in our portfolio is one of, yeah, it's not back to where it would've been had we not had COVID, but you got 11 of our markets, of our 14 markets there actually have positive revenue year-over-year. That's pretty good.
Okay. Then the second question is for Ric. We'll make you the chairman of the Sun Belt, chairman of Texas, and certainly goes, I think, with your Port of Houston chairmanship.
Okay.
This morning, CBRE announced that they're going to move from L.A. to Dallas, where I guess the CEO is from anyway. Just given the discrepancy in employment rebound between your markets versus the continued lockdowns and restrictions on the economies in the coastal blue states, are you guys hearing more business leaders talk increased chatter about relocating their companies to the Sun Belt, or the trends that were already in place that were driving the businesses to move down there are the same, they haven't accelerated or because of what's happened with COVID fallout?
I think it's definitely accelerated. The trends have been in place for a long time, there's definitely more chatter and more discussion about sort of these pro-business markets. When you look at a market like Houston, you've lost all these jobs, then we've added half of them back. In L.A., they've added zero back. You look at Houston, even with energy, we're down 5% year-over-year in September in employment in Houston, which is big, right? L.A. is down 9.7% and has added back zero jobs. I think that the migration from some of these markets will continue. The long-term trends are in place, I think people call COVID the great accelerator, right?
What it's done is it's accelerated the notion of work from home, the notion of less commutes, the notion of virtual leasing, and we were talking about all that. All of a sudden, we had to put it in place in a week. I think that migration trends are going to continue, and the great COVID acceleration's probably going to accelerate it.
Thank you.
Our next question will come from Austin Wurschmidt with KeyBanc. Please go.
Hi, good morning, everybody. It sounds fair to say that even though, I think you mentioned occupancy is at 96%, you feel comfortable continuing to trend higher on renewals over time. You expect new lease pricing could remain under pressure because, in order to remain competitive versus some of these lease-ups and stimulate traffic, you need to continue to offer kind of that negative roll-down on the new leases. Is that fair, or could we actually see it improve as well with the renewal rates?
Austin, that's fair in the markets where we have the most new construction that's being delivered this year and then bleeding over into 2021. Our challenges are almost entirely, we've got the fundamentals are good, the employment's coming back, there's plenty of traffic, there's a lot of demand for the type of communities that we operate and the locations that we operate. However, in some of those markets, Houston would be an example, Dallas is an example, Charlotte is an example, our communities are located in places that are the most desirable places for merchant builders to build new product. They get impacted directly by all the new construction that's going on. Unfortunately, in those three markets that I just mentioned, the construction levels or the deliveries of multi-family apartments in 2021 are roughly the same as they were this year.
We're going to get another 20,000 apartments in Houston, we're going to get another 20,000 apartments in Dallas, going to get another 13,000 apartments in Charlotte. The places that are impacted by new supply are going to continue to be under pressure. However, when you go to the Phoenixes of the world, Raleigh, Denver, Tampa, these are not markets that have been the subject of a lot of new supply, and they're going to continue to outperform for that reason. They got good job growth, they have good fundamentals, they're great places to do business, they've got good in-migration patterns, and they just don't have a lot of new supply. I think that's going to continue to be the bifurcation in our portfolio, is the supply markets, that's probably going to continue into 2021.
I think it's likely that we'll get a decent amount of relief in 2022, but we got to get from here to there first.
No, that's helpful detail. Thank you. I wanted to hit on the development starts. Can you just provide some of the economics underlying the deals on the new starts, what you're assuming in terms of trended rents, etc ?
Sure. Our new starts, if they're urban, the projected stabilized yields are between 5%-5.5%, and our suburbans are 6%-6.5%. We generally, what we do is we do untrended rents as a hurdle to start with, and then we put in what we think the rents might do over a period of time. Our stabilizers do use a trended rent. Today, it's interesting, depending on the market, we have rents going down and then going back up. If you look at, depending on the market, and this gets to Keith's point on where the supply side of the equation is, some markets we think are going to be back to 2019 rent levels by first to second quarter of 2022 or 2021, and other markets are going to take longer.
Our trending, definitely, we have been more conservative in how we think rents are going to grow over the future. Those are the yields and sort of the way we model these developments.
Got it. Thank you very much.
Mm-hmm. Yep.
Our next question comes from Rich Hightower with Evercore. Please go ahead.
Hi. Good morning, guys.
Morning.
Hey.
I guess to follow up on the idea that COVID is accelerating trends that were underway already. Just to dig into this uptick in move-outs for home purchase statistic, I know that you said the year-to-date average is pretty stable year-over-year, but maybe more recently, you're seeing an uptick there. As best you can tell, what would you attribute it to? Is it COVID per se causing those moves, or is it sort of the demographic tailwind that should help homeownership over the next five, 10 years, and COVID's just accelerating that? It's been a long time since we've seen home sales this strong in this country. You'd have to go back to, I think, early to mid-2000s. The template that we're operating from probably doesn't help much. What do you guys think about that, and what should we expect?
I do think it's COVID accelerating, absolutely. If you think about the oldest of the millennials. The oldest millennials are in their mid-30s, and what they're doing now is they're starting to form households.
Yep.
My two daughters are 36 and 38, and they're having their third children right now. Okay. They're classic millennials, and if they were living in apartments, they would be buying houses. Right. We always expected the oldest of the millennials to buy houses at some point. Actually, that's a really good thing for America because when you have good housing demand, moving out to buy a house doesn't ultimately hurt apartments because what happens is you have a better economy, people are building houses, and there's lots of products being put in those houses, and it's good for the economy overall. A lot of the workers that actually build the houses live in apartments. With that said, I think it's definitely accelerated by COVID. I think the historically low interest rates are part of the equation as well.
One of the things I think is actually really fascinating too, if you look at the savings rate between the start of COVID and where it is today, people aren't spending money on stuff, and they're saving their money. You have people who didn't have enough money for down payments and what have you now that actually do because of COVID, because they've saved a lot of money by not going out to restaurants, and to football games, and vacations, and things like that. I don't think that you're going to go to a 25% move-out rate like we had during the you-could-fog-a-mirror-get-a-loan days, but it is a rational thing to happen at this point. One of the challenges that you have, and I've had some questions, after Labor Day, we've had lots and lots of calls with shareholders and potential shareholders.
A lot of the discussion is, are you going to have massive move-outs from the urbans to the suburbans and from millennials buying houses? The interesting thing is that the answer is no, because there's no place for them to go. If you look at housing inventory in Houston, Texas, one of the softest markets we have because of energy and overbuilding, we have a two-month supply of housing in Houston. Even if you had a 20% move-out rate for apartments, you can't because there's no place for them to go. There's no inventory. There's no place for an urban dweller to go to the suburbs because the suburbs are all full too. If this is a long-term trend, maybe over the next 15 years it could happen, but I don't think so.
I think that once COVID is over, you'll have people still want to go to bars. That's one of the challenges we have right now in the spikes. People are getting tired of COVID, and they're going out and doing things socially, and I think that will continue in the future. I'm not too worried about the homeownership rate ticking up. I actually think it's a good thing overall.
Okay. Thanks for the comments.
Our next question will come from Neil Malkin with Capital One Securities. Please go ahead.
Hey, everyone. Good morning.
Morning.
I know Los Angeles, Orange County are in some of your tougher markets, but don't worry, I'm sure miraculously they will all open up November 4th. First question, with technology that you guys have employed, just with the mobile apps and leaned on more heavily because of COVID in terms of how people are leasing and viewing your apartment homes, are there things that maybe you can talk about today that you think that you can bring forward with you when COVID is behind us, to sort of gain more efficiency, maybe increase a long-term margin that isn't maybe one time in nature?
Yeah, absolutely. As we talked about, COVID really has been the great accelerator. And ultimately, when we look at our ability to open up locks now on a remote basis, when we look at our mobile applications that we're using for maintenance type work, etc , when we're looking at virtual leases, I think all of these things are going to ultimately end up making us so much more efficient than we ever would've been if it wasn't for COVID. To the point that was made earlier, a lot of these things we had talked about for a year or two, and we probably thought it was three years on the horizon, and miraculously, all of a sudden it became one month on the horizon. I think we've had some really great efficiencies.
I will tell you that I do think the mobile application to open up door locks and common area space is going to be an absolute game changer for not just Camden, but for the industry.
Yeah, appreciate that. Maybe it's going back to one of Austin's question on development, or maybe the whole transaction markets in that context. You obviously started three projects. I don't recall offhand what your completion schedule looks like for your current pipeline, but what's your comfort in accelerating that, the development, just given what looks like to be a favorable 2022 for deliveries? What does the transaction market look like from a disposition standpoint, just given very favorable pricing with high demand and low interest rates?
For development, we think the development markets can be very good in 2022, 2023, and we're going to try to do as much as we can. It's not easy to get the right numbers. When you have construction costs continuing to rise, maybe at a lower rate because of COVID, but still construction costs have not come down. It's still difficult to get the numbers to work well, but we definitely have a pipeline, and we'll continue to try to add to that pipeline. I think if you're going to deploy capital, development is definitely the number one place for us at this point. In terms of the acquisition and disposition market, transactions are about a third of what they were last year through the end of October. Clearly, transaction volume's down big time.
What is trading is trading at all-time high prices and low cap rates. Cap rates have come in dramatically since COVID. I will tell you that we have not seen an acquisition opportunity that has a four in the cap rate. They're all threes and some change. We're talking Houston, Dallas, Austin, Denver, Tampa, Orlando, everywhere. With that said, acquisition's really tough when you start with a three. People have obviously lowered their IRR hurdles, and then with interest rates as low as they are, most leverage buyers are even with, say, a three and a three-quarters cap rate, they're still able, with positive leverage, to get very nice cash-on-cash returns relative to alternatives out there. From a disposition perspective, clearly it's an interesting environment.
I still think that we need a little more market clearing, a little more sort of what's going to happen between now and sort of first quarter. If you look at what Camden did in the last big cycle, we sold $3 billion worth of assets that were 23 years old or more, and then we bought assets that were four years old. The unique situation then was we sold at cap rates that were very close to the cap rates that we bought at. If that opportunity continues, we may do some of that in the future as well. It's definitely a tough acquisition market, probably a very positive disposition market, but development's where we're focused on right now.
Appreciate the color. Thank you.
Our next question will come from Rob Stevenson with Janney. Please go ahead.
Good morning, guys. Ric, can you just expand on your comments there about construction costs? I mean, there's been the spike in lumber costs. What are you seeing in labor and other materials costs, and how much higher was your construction costs on the projects you started in the quarter relative to if you'd started them pre-pandemic, if at all?
I think that, clearly, the COVID has increased costs because of time and general conditions. For example, we have a property that we're building in downtown Orlando, and the challenge you have with COVID is you have to do all the proper PPE and the proper distancing. We have one-way stairwells, and we have to keep our employees and our construction workers safe, and we're all about that. It just makes the project go slower. The challenge is, it's sort of a manufacturing process, and as you slow it down, your general conditions go up. We haven't had big cost spikes. Mostly, it's just been delays and increases in general conditions and those kinds of things. I think that labor is a little more difficult today, because of the timing of projects getting completed. Costs are definitely not going down.
One of the challenges I think that everyone's having today is, and I think this is an interesting situation, is that most supplies, for example, getting the right equipment and supplies to the properties is starting to be an issue, and primarily because their inventories are way down, and they're having to restock inventories today. That inventory restock has been a challenge. I would say that prices today are 2%-3% higher than we saw on our last starts. That's actually good, because it used to be 7% to or maybe 4%-8% higher. The good news is that the rate of growth has come down, but it hasn't come down enough to improve your yields and what have you. That's why numbers are still hard to make.
Rob, I would just add that, and I think you mentioned it in your question, that the one area that we have had definite challenges, and my guess is that everything we look at indicates it's going to continue to be a problem, is lumber. We've definitely had a spike in lumber costs. As the single family home construction market ramps up, which it's in the process of doing right now, big time, just in response to what is out there in demand for new housing, as that ramps up, it's a wood product, and there's going to be a lot more pressure on lumber as we go forward. That's the one area probably, as opposed to Ric's overall commentary on cost, that we are really looking at hard for trying to figure out ways to manage our lumber package costs.
Okay. Keith, any markets that you see as showing incremental weakness in September, October, that's more than just seasonally? Also, how many residents would be on your evict list today that you can't do given the pandemic restrictions?
Well, it's not a big number. For the CDC mandate, we think we have about 110 residents throughout our entire 60,000 apartments that have given us a CDC mandate. Evictions pending, it's less than 200-300 system-wide. Some of those actually predated COVID, and we're working through those because most jurisdictions have allowed us to go back to the people who were already in default status prior to COVID and work that through the process. In most of our markets, with the exception of California, which has its own set of rules and restrictions, most of our other markets are back to regular order in terms of processing evictions. It's just not a huge deal in our world outside of California. Obviously, in California, you've got a different set of factors there that kind of frustrate our ability to work through the process.
It's been a rolling extension of all those protections for the residents, and who knows when we're going to see the end of that. Big picture, it's a very small component of our overall challenges.
We probably have, in a non-COVID environment, 50-70 evictions system-wide monthly. If you just do an average for the year, it's maybe 600, 700 people being evicted out of 56,000 apartments. It's a really minuscule number. The biggest issue are these high balance delinquencies in California. It's not that they can't pay, it's they won't pay. That's the moral hazard you have there. It's fascinating to me to see that today we have an 8.6% delinquency rate in L.A., and we have a 0.4% delinquency rate in Houston. The difference between the two is moral hazard, period.
Okay. Then any markets showing incremental weakness in September, October, more than just seasonal?
No.
No.
Okay. Thanks, guys.
You bet.
Our next question will come from Amanda Sweitzer with Baird. Please go ahead.
Great. Good morning. Can you guys talk about what you're seeing today in terms of construction financing? Have you seen any other lenders or debt funds kind of come in and fill the gap from national lenders pulling back? Just how have development loan terms changed from pre-COVID, both in terms of interest rate spreads and then LTVs?
Sure. There definitely have been pullbacks from money center banks on development. The debt funds are not coming in to fill the gap. What's happened is, smaller regional banks are definitely coming in to fill some of the gap. The biggest issues that early on, I think Ron Witten had construction starts falling by 50% in his original projections, and that was driven by the debt markets being under pressure because of COVID. Now I think he believes that it's going to be down by instead of 50%, maybe 30%. It is definitely driven by debt. The biggest challenge that merchant builders are having is that banks do not want to syndicate. Getting loans over $50 million is troublesome, and getting a loan over $100 million is very difficult.
Properties in California and other big urban developments are definitely having a real hard time getting financing. I think that spreads have stayed reasonably tight, and with interest rates falling the way they have, I've seen some folks talk about floors in their construction loans, just because rates are at all-time lows. The lenders need a reasonable minimum interest rate or minimum spread, I guess. There are those getting put in place. The biggest issue is the loan amount. I think that's where the challenge is, because it's requiring a whole lot more equity. There are some debt funds that are coming in and bridging that equity with mezz financing. That's generally the construction market as I see it.
Helpful. Thanks.
Our next question will come from John Kim with BMO Capital. Please go ahead.
Thanks. Good morning. I was wondering if you could provide some more color on cap rates you're seeing in the threes. Are these more stabilized assets in the true cap rates, or are they assets with potentially some lease-up potential and the stabilized yields will be higher?
They're stabilized cap rates. Oftentimes, the challenge we have when we start underwriting those is that they're stabilized full. They're 93%, 94% occupied, but there's a tremendous number of new developments around them leasing up. The question that I have when we look at a three and three-quarter, 94%-occupied project with 2,000 units leasing up around it, is how can you actually hold that cap rate? It's likely to go down before it goes up, given the competition. These cap rates are very sticky today because of just the wall of capital and the very, very, very cheap financing. You can get a Freddie Fannie loan, very decent leverage at two and some change for 7- 10 years. If you're a floater, you can get a floating rate debt for under two, right?
That's going to keep the private market very, very buoyant. When you think about fundamentals, post-COVID, the multi-family market's going to come back, and most people believe that we'll be back to 2019 or early 2020 rents by 2022.
Okay. Alex, you mentioned that you sold the Chirp Technology to a third party. I'm just wondering why you chose to sell this platform, and I'm assuming it doesn't impact the rollout across your portfolio, but just wanted to make sure that was the case.
No. Yeah, it does not impact our rollout across the portfolio at all, and we anticipate being fully rolled out by the end of 2021. Ultimately, we came up with Chirp because there was a need that we needed to solve, and there was nobody else in the industry that was solving that. We spun it up. We always knew that ultimately it needed to belong to somebody else that could run with it and could market it to third parties, et cetera. We found a very natural buyer that we think is a great fit with us. We consummated the transaction. We are still very, very much involved.
As I said, right now, we've probably got a little bit over 50% of our communities have the gateway aspect rolled out, and that's what opens up the sort of the exterior doors, and we've got about 5,000 units signed up with the locks.
May I ask who the buyer was?
Yeah, it was RealPage.
Great. Thank you.
Our next question will come from Zach Silverberg with Mizuho. Please go ahead.
Hi. Good morning, guys. As you've discussed, migration trends have been certainly in your favor here for the past couple of years, and COVID will certainly provide an easier year-over-comp in 2021. With occupancy and retention near all-time highs, home sales and supply picking up in some quarters of your market. Putting it all together, which cities or markets do you feel best or most worried about into 2021?
Yeah. I think that we're just starting the process of putting together our property-level budgets for 2021. My guess is that the markets right now where we have the most momentum on new lease rates and renewal rates will probably continue. I think that some of the markets that continue to have supply challenges in 2021 are going to be under pressure. I mentioned those earlier. Houston, Dallas, Charlotte, are going to continue to have supply pressure. We're having great success in Phoenix, Denver, Raleigh, Tampa. My guess is that those will start out probably at the top of the deck in 2021.
One of the things I think is going to be really interesting is to see the unwinding of the 18 to 29-year-olds that have moved home with their parents. That should be a tailwind, post-COVID. When you look at prior to COVID, this is a big number, and it always hurts my head to think about this because I have some kids moving home. Pre-COVID, we had 39% of 18 to 29-year-olds that lived at home. It spiked to 46% in the middle of COVID. It's got down to 42% by the end of the third quarter. One of the positives for us is we've had some of that demand released. There's still over 1 million sort of missing millennials that are doubled up or at home.
Once COVID breaks and job gains come back, those high-propensity renters will come back into the market, and I think more than offset people moving out to buy houses.
Kind of appreciate the color. I guess just to follow up to an earlier comment or question. I was wondering if you could provide any more color as to the product type or geography where bad debt has run a little bit higher, and has your average credit profile tenants changed throughout the pandemic?
Bad debts, or delinquencies, if you want to call them that, are highest in California, for sure. That's primarily, as Keith mentioned, driven by policy there, AB 3088 and what have you. It's just policies there. The other market would be South Florida. South Florida is very tourist-driven, obviously, and South America travel-driven. We've seen maybe 100 to 200 basis points higher there than the rest of the markets. Most of the markets are pretty much in a normal kind of state, including Orlando, given the situation in Orlando, where you have the same kind of 9% job losses there. In terms of credit quality, absolutely not. Credit quality is one of the most important things that we keep high, because we could easily increase our occupancy by 150 basis points if we dropped our credit quality.
What would happen is that you would end up with more bad debts and more evictions and more skips, and there's just no upside ever in lowering your credit quality.
We are seeing no difference in delinquency from Class As to Class Bs or urban to suburban.
Yep.
Delinquency is the same across the board.
Awesome. Thank you, guys.
Our next question will come from Alexander Kalmus with Zelman & Associates. Please go ahead.
Hi. Thank you for taking my question. Just circling back on the point regarding demographics. When you think about your portfolio today in the mix of one, two, three bedrooms that you have, do you think you're accounting for the growing cohort, or you're properly positioned for those growing families? Would you like to see more three bedrooms in the future?
If you look at our three-bedroom components, we have about 6% of our portfolio is three bedrooms. I bet if you took our three bedrooms compared to our one bedrooms, our move-out rate to buy houses would be substantially higher in our three bedrooms than our one bedrooms. We have always generally catered to single people or people with one or two people in the apartment, and not to families, because they have a higher propensity to move out to buy houses or to rent houses. In addition, families just require more stuff, more amenities and things like that. We have a property, for example, in Denver that has all twos and three bedrooms and not very many one bedrooms.
It's a great family property, but it has a higher turnover rate and higher move-out rate to buy and rent a house than any of our other properties in Denver. It's not a market that we are catering to or will cater to in the future.
Got it. Thank you. Makes sense. Just looking at utilities expenses, they weren't that inflationary from last year. Do you have a sense on going back to work in your markets, how many of your tenants are working from home versus going back? Some of your peers had much higher utility increases given the usage on the apartments.
Yeah, what I will tell you, if you look at utility expense, there was not a significant increase. If you look at utility rebilling, which is probably a better way of thinking of it, there was a large increase. We do believe that we've got a lot of our residents are at home utilizing a lot more water and trash than they typically would. We think we've got a great deal of our residents are in fact working from home.
Got it. Thank you for the color.
This will conclude our question and answer session. I would like to turn the conference back over to Ric Campo for any closing remarks.
Thank you, and thanks for being on the call today. We will, I'm sure, talk to a lot of you at Nareit here coming up soon. Thank you, and we'll see you later. Have a great weekend and stay safe.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.