TOD Index™

Dr. Renne authors article in European Financial Review which features data from TOD Index™

2TEFR_Cover_AugSep.jpg

TOD Map140912_VIEW1_garden-lane

 

The TOD Index™  are measures of residential real estate, including home values and rental rates, in transit-oriented development (TOD) locations across the United States.

The TOD Index™ provides information for home buyers, real estate investors, developers and economic development professionals to guide their investment decisions.

Utility

Both research and theory suggests that rental rates and home values in TOD locations have historically experienced greater capital appreciation during periods of economic growth and less downside during challenging periods of the market cycle.

However, home buyers,  real estate investors, developers and economic development professionals have previously experienced difficulty accessing a comprehensive database and a simple and standardized methodology to benchmark month-to-month changes in TOD locations and to uncover potential actionable mispricing opportunities.

The TOD Index™ is the first longitudinal solution to these long-standing problems.

Methodology

Criteria for inclusion as a TOD, The TOD Index™ methodology requires areas located within a half-mile of a fixed-route transit station (this includes all types of passenger rail, ferry terminals and bus-rapid transit stations) to have:

  1. Minimum Walk Score of 70, and
  2. Minimum gross housing density of 8 units per acre (or 4,000 total units) across the half-mile station area.

Data

Of the 4,500 fixed-route transit stations across the United States, 1,323 stations met the criteria noted above and had sufficient data available for rentals and 1,442 stations met the criteria and had sufficient data available for home values.

The inception of the database came from the National TOD Database and the real estate data is based on Zillow, which utilizes the zip code as the smallest unit of analysis. 

Rental Data

Of the 4,500 fixed-route transit stations across the United States, 1,323 stations met the criteria noted above and had sufficient data available.  Figure 1 shows that rental rates in TODs  appreciated from $1.81 per SF in November 2011 to $2.52 per SF in April 2016 representing a growth rate of 38.9%. The average apartment in the United States appreciated from $0.88 per SF in November 2011 to $1.01 per SF in April 2016, representing a growth of 14.7%, a statistically significant difference of 24.2%.

Figure 1: Rental Rates in TODs compared to National Average ($ per SF)

TOD Rental Rates

Figure 2 shows the TOD Index for Rental Values.  With a base of 100 in November 2011, TOD stations had an index value of 138.9 in April 2016 while the average for all apartments in the United States had an index value of 114.7.

Figure 2: TOD Index Rental Values

Rental TOD Index Chart.jpg

Figure 3 reports the year-over-year rental value change by month for a period of 54 months beginning November 2011 to April 2016.  The data show that year-over-year rental growth in TODs outperformed the national market in every month during this period.  The average year-over-year price growth was 7.1% for apartments in TODs compared to 2.7% for all apartments in the nation, a significant capital appreciation differential of 205%.

Figure 3: Year-Over-Year Rental Price Change by Month

Rental Growth past 12 months percentage

Home Value Data

Of the 4,500 fixed-route transit stations across the United States, 1,1442 stations met the criteria noted above and had sufficient data available.  Figure 4 shows that home values in TODs  appreciated from $131.52 per SF in April 1996 to $549.39 per SF in April 2016 representing a growth rate of 317%. The average house in the United States appreciated from $73.45per SF in April 1996 to $155.80 per SF in April 2016, representing a growth of 112%.

Figure 4: Home Values in TODs compared to National Average ($ per SF)

TOD Index Home Value Price Chart.jpg

Figure 5 shows the TOD Index for Home Values.  With a base of 100 in April 1996 , TOD stations had an index value of 417.7 in April 2016 while the average for all homes in the United States had an index value of 288.4.

Figure 5: TOD Index Home Values

TOD Index Home Value Chart

 

Figure 6 reports the year-over-year home value change by month for a period beginning April 1997 to April 2016.  The data show that year-over-year home value growth in TODs outperformed the national market in every month during this period.  The average year-over-year price growth was 7.8% for homes in TODs compared to 4.1% for all houses in the nation.  By and large, this data show that TOD homes appreciate faster in up-market cycles and hold their value better during down market cycles, a compelling historical upside/downside capture ratio.

Figure 6: Year-Over-Year Home Value Price Change by Month

TOD Index Year over Year Home Values by Month

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