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Camden Property Trust  (NYSE:CPT)
Q3 2018 Earnings Conference Call
Oct. 26, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Camden Third Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note, this call is being recorded. I would now like to turn the conference over to Kim Callahan Senior Vice President of Investor Relations. Please go ahead, ma'am.

Kim Callahan -- Senior Vice President-Investor Relations

Good morning and thank you for joining Camden's third quarter 2018 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 and 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 2018 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 this call.

Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer. We will be brief in our prepared remarks and try to complete the call within one hour. We ask that you limit your questions to two and rejoin the queue if you have additional items to discuss. 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.

Richard Campo -- Chairman & Chief Executive Officer

Thanks, Kim, and good morning. I'd like to start with to give a shout out to John Kim of BMO Capital Markets for providing this quarter's on-hold music. John got the honor by winning our Name That Music contest last quarter. John's theme for the call were songs from 2009, the year the great recession ended. To some of you, the songs may sound recent. To others, they may have sounded ancient. Probably it depends on how you're personality impacted by the recession.

John didn't say this but I'd be willing to bet there are more than a few of you on the call today who were still in school in 2009. Time climbs when you're having fun. And speaking of fun, Camden's third quarter results would qualify as fun. Our on-site teams and our support teams performed better than we had expected with solid revenue growth and great expense control driven by our Attack The Run Rate initiative.

Apartment fundamentals remain strong despite high levels of supply in most of our markets. Strong job growth and migration from high cost and high regulatory states has continued to support high apartment demand in Camden's markets. For the year, we've completed $600 million of combined acquisitions and development starts, which is in line with our original guidance. The mix has changed, however.

Our development starts were $100 million more than our guidance and our acquisitions are $100 million less than our guidance. We effectively traded lower-yielding acquisitions for higher-yielding developments albeit the time will be different on producing those yields.

With that said, I'd like to turn the call over to Keith Oden.

Keith Oden -- President

Thanks, Ric. Last quarter was Camden's 100th quarterly earnings call. So this quarter begins the next 100. Honestly, I gladly take another 99 just like this one as our results were solid and slightly better than we expected for both the quarter and year-to-date. Same-store revenue growth was 3.1% for the third quarter, 3.2% year-to-date and up 1.1% sequentially.

Our top markets for revenue growth for the quarter were Denver at 4.3%, Orlando at 4.1%; Houston and Phoenix both at 3.8%; and San Diego/Inland Empire at 3.6%. Our weakest three markets again this quarter with less than 2.5% growth were Dallas, Austin and Charlotte, the most heavily supply challenged markets in our portfolio.

Overall rents on new leases and renewals were slightly better-than-planned year-to-date and looking encouraging relative to our fourth quarter plan. In the third quarter, new leases were up 3.1%, renewals up 5.5%, providing a blended growth rate of 4.2% versus 2.8% in the third quarter of last year. So far in October, new leases are basically flat with renewals up 5% for a blended increase of 1.8%.

October occupancy is running at 95.8% versus 96% last October. However, just a reminder that last year's October occupancy rate was influenced by the Hurricane Harvey occupancy effect which drove Houston's occupancy rate up to 97.5%. The Harvey effect will have a measurable impact on our Q4 comparisons to last year.

Our third quarter net turnover rate fell again to 54% from 55% last year and remains below last year's 49% turnover rate at 47% through the first three quarters. In the quarter, move-outs to purchased homes dipped to 14.3% versus 14.6% last year, leaving us at 14.7% year-to-date and that compares to 15.2% last year.

It appears that the gradual upward trend over the last several years in this metric may have stalled in 2018 at a level well below the historical norm and bear us watching in coming quarters. I'd like to thank all of our Camden associates for an outstanding quarter. Let's finish strong to close out 2018. I would like to turn the call now over to Alex Jessett, Camden's CFO.

Alexander Jessett -- Chief Financial Officer

Thanks, Keith. And before I move on to our financial results and guidance, a brief update on our recent real estate and financing activities. At the end of the third quarter we purchased Camden Thornton Park, a recently constructed 299-unit 9-story community in the Thornton Park neighborhood of Orlando for approximately $90 million. This community is directly adjacent to our existing Camden Lake Eola development, providing the opportunity for further operating efficiencies.

Also, at the end of the quarter we sold a 14-acre out parcel adjacent to our development site in Phoenix for $11.5 million. During the third quarter 2018, we began construction on Camden Buckhead in Atlanta. This $160 million 365-unit development will be the second phase of our existing Camden Paces community and will consist of one 8- and one 9-story concrete building. Subsequent to quarter-end, lease-up was completed at Camden NoMa Phase II in Washington D.C. This $108 million development is expected to deliver a stabilized yield of approximately 8.25%, creating over $80 million of value for our shareholders.

For 2018, we have now completed $300 million of acquisitions and started $280 million of new development. We are not anticipating any additional acquisitions or dispositions in 2018.

Turning to our recent financing activities, on October 1, we repaid at par $380 million of secured debt consisting of $175 million of 2.86% floating rate debt and $205 million of 5.77% fixed rate debt for a blended average interest rate of approximately 4.4%. The repayment of the secured debt unencumbered 17 communities, valued at approximately $1.1 billion.

We repaid the secured debt using proceeds from a $400 million 10-year unsecured bond offering which we completed on October 4. The effective interest rate on this new unsecured issuance is approximately 3.74% after given effect to the settlement of in-place interest rate swaps and deducting underwriters disocunts and other estimated expenses of the offering. After taking into effect these transactions, 79% of our debt is now unsecured and 90% of our assets are now unencumbered.

Turning to financial results, last night we reported funds from operations for the third quarter of 2018 of $117.1 million or $1.20 per share, exceeding the midpoint of our guidance range by $0.01. This $0.01 outperformance resulted primarily from approximately $0.005 in lower same-store operating expenses due to lower turnover costs, lower amounts of self-insured healthcare costs and continued cost control measures, and $0.005 in higher non-same-store net operating income, resulting than better-than-expected results from both our previously completed acquisitions and our current development communities.

We have updated and revised our 2018 full year same-store expense, net operating income and FFO guidance based upon our year-to-date operating performance and our expectations for the fourth quarter. As a result of actual and anticipated future expense savings, we have reduced the midpoint of our same-store expense guidance by 45 basis points from 3.5% to 3.05% and increased the midpoint of our same-store net operating income guidance from 3% to 3.2%.

Last night we also increased the midpoint of our full-year 2018 FFO guidance by $0.02 from $4.74 to $4.76 per share. This $0.02 per share increase is the result of our anticipated 20 basis points or $0.01 per share increase in 2018 same-store operating results, approximately $0.005 of this increase incurred in the third quarter with the remainder anticipated in the fourth quarter and $0.01 of additional non-same-store outperformance from our previously completed acquisitions and our current development communities. Approximately $0.005 of this increase also occurred in the third quarter with the remainder anticipated in the fourth quarter.

Last night we also provided earnings guidance for the fourth quarter of 2018. We expect FFO per share for the fourth quarter to be within the range of $1.20 to $1.24. The midpoint of $1.22 represents a $0.02 per share increase from our $1.20 reported in the third quarter of 2018. This increase is primarily the result of a $0.01 per share or approximately 1% expected sequential increase in same-store NOI driven primarily by our normal third to fourth quarter seasonal declines in utility, repair and maintenance, unit turnover and personnel expenses; a $0.01 per share increase in NOI from our development communities and lease-up; and a $0.01 per share increase from NOI from our recent acquisition of Camden Thornton Park.

This $0.03 per share cumulative net increase in FFO will be partially offset by: a $0.01 per share decrease in FFO resulting from a combination of higher overhead costs due to timing of certain corporate related expenditures and slightly higher interest expense as the fourth quarter interest savings from our recent debt refinancing will be offset by higher amounts of debt outstanding and lower amounts of capitalized interest as several of our developments near construction and completion.

Our balance sheet is strong with net debt-to-EBITDA at 4.1 times and a total fixed charge coverage ratio at 5.5 times. We have $793 million of development currently under construction with $380 million remaining to fund over the next three years. As of October 25, we have no amounts outstanding on our unsecured lines of credit and $30 million of cash on hand.

At this time, we will open the call up to questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And the first question comes from Nick Joseph with Citi.

Nick Joseph -- Citi -- Analyst

Thanks. Just on Houston, you are facing a difficult occupancy comp in 4Q. So how are things trending from a new and renewal lease perspective? And then as you face more normalized occupancy comps next year, I know it's in pro forma guidance, but how is Houston looking in 2019?

Richard Campo -- Chairman & Chief Executive Officer

Well, we're in the process of putting together our bottom up budgets. So, we look at all kinds of different data providers and if you look at what Ron Witten has in his outlook for 2019 in Houston, he's got revenues going up somewhere in the 4% to 5% range. We'll see where ours come out. Clearly, the comp is a tough one because of occupancy in the fourth quarter, but that normalizes pretty quickly in the first part of next year on occupancy. We trended back down to about 95% as we expected we would by the second quarter. So I don't think there would be much of that noise in the numbers.

Houston continues to recover nicely. I think last month we got a report that showed that the trailing 12-month job growth in Houston, Texas was 128,000 jobs. So that's enough to move the needle even in a metropolitan area like Houston. So things continue to recover very nicely. The nice thing is that up until recently the job growth had been coming pretty much without participation by the integrated oil companies and within the last two quarters that's -- we've really seen a shift in that. They began to hire again. They are at full capacity. So I think that bodes well for Houston job growth in 2019.

Obviously, we have a very constructive supply scenario for Houston next year, around 8,000 apartments that are going to be delivered into the Houston metropolitan area which is sort of a rounding error in terms of total supply. So if we get another really good job growth here in 2019 which is kind what's projected in most people's numbers, 8,000 new apartments, that's really good math for our business.

Nick Joseph -- Citi -- Analyst

Thanks. And just on the balance sheet, after repaying the secured debt earlier this month, it looks like the only remaining secured debt is coming due next year. How do you think about the use of secured debt as part of the overall capital going forward?

Alexander Jessett -- Chief Financial Officer

Yes, we fundamentally believe that we should be an unsecured borrower. So we've got $439 million of secured debt that is coming due in the first quarter of 2019 and our intention is to not take that out with additional secured debt.

Nick Joseph -- Citi -- Analyst

Thanks.

Operator

Thank you. And the next question comes from Juan Sanabria from Bank of America.

Shirley Wu -- Bank of America -- Analyst

Hi guys, this is Shirley Wu call in for Juan Sanabria. Congrats on a great quarter. So as we move into 2019, outside of Houston which markets do you believe are set to accelerate or decelerate from 2018 especially in your higher market like Dallas or Charlotte?

Richard Campo -- Chairman & Chief Executive Officer

Yes, so again we're in the process of putting together our game plan in all of our markets. And obviously we can look at aggregated data from data providers. I think the one that we rely most on is Ron Witten's numbers. And if you look at what Ron Witten has modeled for Camden's markets into 2018 to 2019, he's got total revenue growth for 2018 at somewhere around a little over 3.2%. And if you look at it in 2019, that number goes up to about 3.7% in his high level aggregated number. So, clearly Ron is looking for an improvement across the board, a slight improvement of about 50 basis points in our entire portfolio.

What that means for each of our individual markets, we'll have to wait and see until we get the final results and review process for our 2019 revenues, but we will give you some guidance on in the first part of 2019. But overall if you just kind of think about the drivers in our business and if you look at employment growth and supply, there is really not a huge difference between the outlook of what's happening in 2018 and what the outlook is for 2019.

Job growth comes down a little bit across our platform. New completions stay relatively flat, but the change in the ratio of new jobs to completions doesn't really move that much. We're a little bit above 5 times for 2018. That drops to a little bit below 5 times for 2019. So, overall just looking at the macro data and not drilling down to each individual market, which is the whole purpose of our budget process, you would look at the macro data and say, 2019 should look a lot like 2018, maybe some slight improvement. So we'll have to see how it plays out.

Hardik Goel -- Zelman & Company -- Analyst

That's great. Are there any markets in particular that you might be concerned about in terms of like maybe supply and rents not being there?

Richard Campo -- Chairman & Chief Executive Officer

Well, the supply challenged markets that we have right now are the three weakest markets that we operate in are Austin, Dallas and Charlotte. And if you look at the supply numbers for 2019, there is very little relief coming in any of those three markets. Dallas gets a little bit better. Austin actually gets a little bit worse on supply and Charlotte is about the same. So I think you can look for us to continue to be swimming upstream on those three markets just because of the headwinds of supply.

Shirley Wu -- Bank of America -- Analyst

Thank you guys.

Operator

Thank you. And the next question comes from John Kim of BMO Capital.

John Kim -- BMO Capital Markets -- Analyst

Thanks again for allowing me to be your hold music DJ. On your turnover rate of 47%, can you comment on any markets that are meaningfully higher or lower than your portfolio average?

Richard Campo -- Chairman & Chief Executive Officer

From an historical standpoint, when you look at them and I don't have the details of each one, but when you look at them year-over-year, you always have markets that have higher versus lower turnover rates. But if you look at them by comparison, there's nothing that stand out in our portfolio. So we've had 2% difference in the turnover rate from last year and that would be consistent across the platform. But within that set of data, you've got turnover rates that vary by as much as 7% or 8% up and down from the average in our portfolio. We can give you that the data offline, if you like.

Keith Oden -- President

And one of the things that's interesting when you look at turnover is sort of the migration patterns of sort of Americans and what's happened over the years and how that's changed. There's really been a secular change in sort of people making moves and wanting to make moves. It's primarily I think because of, number one, the millennials are kind of different breed of cat compared to sort of the baby boomers. And they were always willing to move to a new city to get a job, get a better job and what have you.

But today with that employment rate as low as it is and the competition in the job market, it's a lot more difficult to relocate people from their market when they have a home and kids and things like that than in has been. Now you clearly still have out migration from California and some of the other East Coast cities that has been going on for a long time. But generally speaking people are staying put longer in their homes and in their apartments and they are not moving as fast as they did in the past.

And I think it's that sort of secular change in just the way people kind of do everything, including getting married a lot later in life or maybe not getting married at all and then also having children later. It sort of moved into the system and now our traditional turnover rates are just not what they were in the past because of that.

John Kim -- BMO Capital Markets -- Analyst

Thank for that. Alex, on the senior notes, it looks like impressive move to lock in the 10-year early to reduce the effective interest rate. But can I ask how long the swap agreements duration for?

Alexander Jessett -- Chief Financial Officer

Yes, so they are 10 years. And so, we first started entering them at the end of 2017 and we finished them in early part of 2018. And so, it's for a 10-year period. So the way it works is there is a net settlement and the net settlement was clearly in our favor. And then we'll amortize that net settlement against interest expense over the full 10 years.

John Kim -- BMO Capital Markets -- Analyst

So the 3.7 is for the full?

Alexander Jessett -- Chief Financial Officer

That's correct. Yes, so 3.74% for the full 10 years.

John Kim -- BMO Capital Markets -- Analyst

Got it. Thank you.

Operator

Thank you. And the next question comes from Austin Wurschmidt from KeyBanc Capital.

Austin Wurschmidt -- KeyBanc Capital -- Analyst

Hi, good morning. First question, so the outside of the year you are projecting D.C. to be at 3% revenue growth market I believe and you are tracking a little bit below that up into this point. And there's been some recent comments from one of your peers concerning CBD fundamentals in particular. So I was curious, without giving 2019 guidance, what sort of your outlook or optimism for your suburban markets Northern Virginia and Maryland over the next six to 12 months?

Richard Campo -- Chairman & Chief Executive Officer

Yes, so D.C. metro, at the beginning of the year we rated it as the B market and stable which is pretty consistent with where we think we're operating. If you think third quarter this year, our average revenue growth in portfolio was 3.1%; D. C. metro was 3.1%. So this is the first time in a while that D.C. metro has been in the top half of our revenue numbers. So that's a good sign.

For the third quarter, Houston was 3.8%. So if you think about our two largest markets, D.C. metro and Houston are both in the top half of our portfolio. And again that hasn't happened in some time. So we're reasonably optimistic about our D.C. portfolio, not only through the end of the year, but into 2019. As you all know we have very different footprint than a lot of our other competitors have in the D.C. market with a lot of suburban exposure. And I think that's served us well for the last couple of years relative to the comp set.

Obviously, we're sort of in a transition in a lot of these markets where a ton of the supply has been more in the urban core. And where we have more exposure in urban areas, that's been a negative. And our suburban markets have been a positive. My guess is that at some point there -- just based on the decline in new supply that's inevitable in starts that are inevitable in the next couple of years that, that will benefit the urban areas more so than the suburban areas. So overall we're pretty optimistic about where we are situated in D.C. in 2019 and I look forward to seeing some of that reflected in our D.C. budgets when we roll them out.

Austin Wurschmidt -- KeyBanc Capital -- Analyst

Okay. Thanks for that. And as far as development, you mentioned the pipeline is around $700 million at this point and you've got some projects that will wrap up here in early part of 2019. What's the appetite to backfill these projects, so the right level of development we should be thinking about for you moving forward?

Richard Campo -- Chairman & Chief Executive Officer

We're very comfortable in the $200 million to $300 million development starts annually going forward into '19 and '20. We have that pipeline of land or transactions that are in progress right now to be able to start those projects between now and/or '19 and '20.

Austin Wurschmidt -- KeyBanc Capital -- Analyst

And Keith, can you quickly just give the yield on the Buckhead development?

Keith Oden -- President

On the development that we started?

Austin Wurschmidt -- KeyBanc Capital -- Analyst

Yes, correct.

Keith Oden -- President

Yes, so the development we started It's trending at around 6-plus or minus. The interesting things when you think about the development cycle, we first started building we are doing 10s. 10 cash-on-cash, you can imagine that in Houston and Tampa back in 2010, 2011 and 2012. And over time as a result of increased construction cost and just the time it takes to build and the pressure in the market, the yields have compressed.

But when you look at building to a 6 when the market today on an acquisition basis is still at 4, 4.25, you're still making a very nice spread over what we could get on an acquisition for the development risk. And we get to build what we want as opposed to buying somebody else's building that wasn't necessarily built by us for us.

Austin Wurschmidt -- KeyBanc Capital -- Analyst

Great. Thanks for taking my questions.

Operator

Thank you. And the next question comes from Rich Hightower with Evercore ISI.

Richard Hightower -- Evercore ISI -- Analyst

Hi, good morning guys. So I guess just a quick follow-up on the development question there. Do you see that spread between market cap rates and yields compressing given the increase in the base rates combined with just this unabated cost of lease under construction site?

Richard Campo -- Chairman & Chief Executive Officer

Well, I think the issue becomes -- yes, absolutely spreads have tightened compared to where they were in the past. They were really wide and people are making wider spreads than they've ever made in my business career. And so that has gone to the point where it's more normalized, you know, 150, 200 basis points positive spread between acquisition and development -- on the development side. But I think part of the issue is that it's really hard to get fine transactions like that, that's why we're $200 million to $300 million and not $500 million.

And so it is more difficult to get deals done and to make the numbers work from that perspective. The thing that's interesting when you think about the 10-year treasuries, obviously it has gone up from the beginning of the year and people think about why haven't cap rates gone up as fast as the 10-year. And/or therefore you are thinking that prices have to come down and cap rates have to go up. But there's a massive wall of capital today that continues to flow into real estate and multifamily specifically, sort of the darlings of multifamily and industrial with Amazon effect with industrial.

We had a Board Meeting this week and we had HFF come in and update our Board on current market conditions. And they had a slide that showed $182 billion of unfunded real estate capital that needed to find home. And when you start thinking about apartments, when you think about cap rates, the tenure is probably the last thing that influences cap rates. The first thing is liquidity and that's how much money from the market, chasing deals. Second is market fundamentals or operating fundamentals, supply and demand.

The third is inflation expectations. And the fourth is 10 years. And when you look at the relationship of cap rates today, we have massive liquidity. We have pretty decent supply fundamentals and demand fundamentals. And if the Fed is raising rates because they're worried about the economy getting overheated and inflation coming back, well, the multifamily is just an expensive asset from that perspective because we mark pretty much 8% to 10% of our leases to market every single month. So it's a very sought after asset class. Unless there's going to be a massive change in liquidity or operating fundamentals or expectations on inflation, I don't see cap rates doing anything but stand really sticky and prices doing nothing but going up because cash flows are increasing.

Richard Hightower -- Evercore ISI -- Analyst

Okay, that's helpful. I think that the wall of capital argument is an interesting one. Let me ask this question, if we apply that to Houston, clearly supply is going down. Next year that's a very favorable set up. But just given the quickness of the supply response in a market like Houston and given Camden's long-standing experience, how do you sort of expect that picture to evolve as we get further into 2019? Do you see permits accelerating again given that wall of capital that would presumably still be interested in multifamily in a market that's generating 80,000/90,000 jobs a year, something like that and just given the fundamental dynamics there?

Richard Campo -- Chairman & Chief Executive Officer

Yes, Houston clearly has the best story in America right now; lowering supply, increased job growth, very dynamic market. And so we do absolutely expect starts to increase and permits to increase in 2019 and 2020. The good news is that you can't to build your project fast enough to really negatively impact probably 2019 and part of 2020.

When you get down to it, the market is very transparent and I think that's really interesting thought when you start thinking about supply and how you can turn it on and turn it off. In the past people thought of these markets like the sort of non-barrier to entry markets as always vulnerable to overbuilding. Well, because of the transparency today in the marketplace, people who are making capital decisions on the equity and debt side of this business are -- they see everything that's out there.

And they know what's coming. They know what the supply and demand dynamics are. When the supply and demand dynamics get out of whack, they stop just like Houston. We went from 20,000 to 7,000 or 8,000 units this year. So I think that Houston will ramp up because it's the house of story. But the question is how many can get done given the cost environment and given the return requirement issues.

Alexander Jessett -- Chief Financial Officer

Yes, just to put some numbers around that, that's all correct. And Witten's got completions in Houston that's 6,000 this year and I think that's going to be correct as it turns out. His projection for next year is 7,000 completions and then he has that ramping up to 13,000 completions in 2020. So yes, absolutely it's going to go up.

But 13,000 completions in a metropolitan area like Houston is as long as to get OK job growth it's not going to be disruptive at all. That's below the long-term trend. So yes, there's no question that Houston is the best story out there right now and there's certainly a lot of activity right now, pre-development activity going on in Houston.

Richard Hightower -- Evercore ISI -- Analyst

Got it. Thanks guys.

Operator

Thank you. And the next question comes from Alexander Goldfarb with Sandler O'Neill.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Good morning. Echoing John's comment, Alex, congrats on your timing on that debt issuance. So two questions here. The first, just going back to D.C., the common market sentiment is that Amazon is going to pick Crystal City for H-Q2. So just curious your thought on, one, the impact to your portfolio, and then two, just longer-term, D.C. seems to be a great developers market, not a great operators market. So your view is that Amazon announces it and suddenly all the developers do is ramp up and therefore the land merger don't get the benefit or do you think there may be some long-term benefits for the landlords?

Richard Campo -- Chairman & Chief Executive Officer

Yes, so my take -- first of all, I hope I would be perfectly hope -- hope you're right, they are right, the prognostic is right on Amazon that it would be great benefit to us and a lot of other people. We have a decent-sized footprint that would be impacted by that location decision, no question about it. And as to the point on D.C. metro, it really hasn't been as much a supply challenge in D.C. metro over the last couple of years as it just has been weaker job growth.

If you look at what's coming this year, we got about 10,000 completions in D.C. metro in 2018. That looks like that ramps up a little bit to around 12,000 next year and then back down to 2,000 in 2020. So, 10,000, 13,000, 10,000 in the entire D.C. metro area, that's not, historically that wouldn't be real troublesome on the supply side. The challenge has been that if you look at job growth, it looks like 2019 is on Witten's numbers, it's at about 39,000 and he has that drop into 22,000 in 2020.

Now obviously, Amazon is a game changer for all of that. But unlike many of our other markets, it's really not hyper supply in D.C. that's been limiting the ability to push rents there at the pace of the rest of our portfolio. It's primarily been on the job side.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay. And then the second question is, your comments on preference for development versus acquisitions seems to be sort of consistent with what's been going on in practicality. But you guys went raised money over a year ago to go out and buy a bunch of stuff. That's proven more difficult. Do you think that the jump in rates will spur some of these merchant guys to want to sell quicker just given how rising rates could impact their IRRs and maybe it's made their decision -- advance their decision? Or your sense is that the rising interest rate will not change the pace that the merchant guys sell their product?

Richard Campo -- Chairman & Chief Executive Officer

Well, last year we thought that would happen in 2018 and obviously it didn't. If you look at the stats on sales, in 2017, the number of multifamily sales was down from 2016 and we thought it was going to be down again for 2018 and it turned out to be way out in 2018. So that could happen. I think there is definitely more merchant builders stressed out there just from the standpoint of, they've got product they need to sell to be able to reload their balance sheet because in the past, like if you go back to sort of pre-great recession, most of merchant builders used to keep building no matter what because they could guarantee debt with no tangible assets on their balance sheet and the banks will let them do it.

Today, the banks won't let them do it. So they do have to clear the asset in order to be able to reload their pipelines. So that is one difference that could impact and have the ability to get merchant builders at least more constructive on selling at prices that we want to buy at. On the other hand, we thought that was going to happen in 2018, but it didn't. What's happening -- what we are also seeing though is sort of instead of selling, people are refinancing and you could refinance merchant builder deal with a high margin, basically take all of your cash out, including your equity and be siting with sort of more higher leverage transaction without any equity in it.

So, a fair number of them are doing that as well, just holding the assets and putting them in a sort of longer holding pattern. So I think that ultimately the merchant builders do have to sell. The question is, are there going to be enough buyers to take up that inventory? And I think right now there are. So that's why we decided to lower our acquisitions guidance and increase our development.

And when you think about our -- when we raised that capital, we talked about $500 million of acquisitions, so we've just changed the mix a bit even though that does change the timing of when we are able to enjoy those yields. But I think that might be the case in 2019 as well just given the capital -- wall of capital issue.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay, thank you.

Operator

Thank you. And the next question comes from Rob Stevenson with Janney.

Robert Stevenson -- Janney -- Analyst

Good morning, guys. Alex, how much of the same-store expense savings are moving down from your 3.5% down to about 3% guidance for the year? Is the timing issue versus (inaudible) expect to be sustainable into 2019 and beyond?

Alexander Jessett -- Chief Financial Officer

Yes. None of it is timing at all. As I've said on a couple of past calls, you've got a couple of things that are occurring. Number one, people are just not getting sick as often which is really good news for all of us. But the second thing is that we are becoming very efficient on our R&M and our unit turnover cost. And there is no reason to believe that that should not be easily replicated in future years.

Robert Stevenson -- Janney -- Analyst

Okay, so like none of the savings here is from property taxes that could wind up spiking back up in 2019?

Alexander Jessett -- Chief Financial Officer

No. In fact if you think about where we are, we started the year with a 4% same-store expense growth. And we had assumed the property taxes will be 4.2%. We now assume property tax is going to be 6% and yet we're at 3.05% same-store growth. So property taxes were worse than we expected but all other categories were far better than we expected, overcoming this unexpected increase in Atlanta property taxes.

Robert Stevenson -- Janney -- Analyst

Okay. And then, Keith, of your better performing markets, which have the smallest gap between new lease and renewal growth rates? What are the ones that are closest to an inflection point there of meeting or possibly crossing in the future?

Keith Oden -- President

So, of our better performing markets the gap on new leases and renewals is falls -- everyone of them falls in favor of renewals versus new leases. So -- and it's been that way for a number of quarters. If you kind of look out at our 2018 numbers and I gave you in my opening commentary worth 5.5 on renewals and 3.1 on new leases. So -- and I'm looking at the detail and I don't see a single one where we're upside down one way or the other on renewals versus -- there may be one or two markets. But the preponderance of our markets continue to have renewals above new leases. And my guess is that, that probably tightens in 2019 but I'd be surprised to see if you had a shift in many of our markets between new leases and renewals.

Robert Stevenson -- Janney -- Analyst

Okay. Thanks guys.

Operator

Thank you. And the next question comes from (inaudible) with Scotiabank.

Unidentified Participant -- -- Analyst

Hi, good morning. Thanks for taking the questions. First, one of your peers indicated that some of its markets haven't yet started the normal seasonal decline in rate growth of that usually comes in the fourth quarter. So are you seeing this in a noticeable way across any of your markets in your portfolio? And if so what would you attribute that to?

Richard Campo -- Chairman & Chief Executive Officer

Yes, I think ours looks like it has historically. In fact I think if you look at the data that we have so far in October, we are basically flat on new leases and 5% on renewals. So I think that that's typical and that's what we would expect. And if you look at our budget, how we would budgeted for the fourth quarter, that's pretty much in line with where we would expect to be. So, no big revisions from original forecast on our portfolio. So I'm not sure who that is, maybe they have a very different footprint than we do, but we are seeing what we historically see in the fourth quarter.

Unidentified Participant -- -- Analyst

Okay, that's fair. And turning back to Houston, just specific to the McGowen development, can you remind us where concessions stand on that asset and what merchant builders are offering competitively in that area?

Keith Oden -- President

Sure. The developments today in downtown and midtown and probably the Gallery are so offering one to two months free, plus or minus. It depends on the unit type and what have you, but that's a very typical in the market still. And it's interesting because sometimes people will say, well, wait a minute. How are you growing your same-store portfolio revenue when there is two months free in the development market?

And it's interesting because on the one hand people would expect that to translate into the marketplace. But when you think about the number of units you have to actually lease and maintain your 95% or 95%-plus or minus occupancy, it's not that many units. So you don't have a big pressure to give concessions in an existing portfolio when a development is say 50% occupied. And everyday it goes by without increasing that occupancy that, that revenue from that unit is lost. So sort of like an airplane seat when it takes off. So merchant builders are very quick to the trigger on giving concessions and filling them up as soon as they can.

Unidentified Participant -- -- Analyst

All right. Thank you very much, appreciate it.

Operator

Thank you. And the next question comes from Alan Wilmit (ph) with Goldman Sachs.

Unidentified Participant -- -- Analyst

Hi, good morning. When we look at your lease spreads, it seem to imply that same-store should be accelerating. The guidance implies that 4Q is slowing. I'm not asking for a 2019 guide, but are leasing spreads in the right thing? Or is it possible to occupancy or other factors the same-store can flow in 2019 while leasing spread accelerate?

Richard Campo -- Chairman & Chief Executive Officer

Yes, again I'm going to refer back to the overall guidance that Witten has in his numbers. If you look at overall US, he has rates going up about 50 basis points. You look at Camden's portfolio specific in our 15 markets, the same 50 basis points acceleration into 2019. So I think at the aggregate level and obviously you're going to have ups and downs and variances among based on the supply conditions in each of our markets, but overall his judgment is that rents will be up or revenues are going to be up about 50 basis points in 2019 over 2018.

I'll know better in a month or two how well our numbers are correlated with or not correlated with Ron's, but that's kind of his forecasting and we do back-testing on all the stuff that he does and he's been pretty good over the years in terms of his forecast for revenue growth. So as we sit here today, that's kind of the best evidence that we have that it looks like in the Camden portfolio we should see -- we could in fact see a reacceleration in revenues in 2019.

Unidentified Participant -- -- Analyst

That's helpful. Thanks a lot.

Operator

Thank you. And the next question comes from (inaudible) with MUFG.

Unidentified Participant -- -- Analyst

Hi, good morning. Ric, I think you mentioned in your opening comments in migration into your markets from higher cost in Texas regions. Do you see any evidence of that and can you just talk about how you think that could contribute to demand?

Richard Campo -- Chairman & Chief Executive Officer

Sure. The evidence is clear. If you look at -- just pull the last census numbers for last 10 years, you'll see the domestic out-migration of California is negative. It's just the whole -- you have people leaving California, going to Phoenix, going to Austin, Texas and other places. And even though population has not declined in California, for example, I use California as a good example because it's so big and it's easy to talk about. You've had increases in population in California primarily driven by immigration and birth and taken down by out-migration. And so, those numbers are readily available via the Census Bureau.

And then when we just -- anecdotally when we talk to our Phoenix folks, for example, that would be a good example. We have a lot of folks who are renting apartments that are from California. And if you look at -- another one interesting stat would be the cost of U-Hauls, it's cheap to rent a U-Haul from Phoenix to go to California but more expensive from California to Phoenix because they end up with all these excess U-Haul trucks in these markets. And so it's definitely something that's going on and supporting our demand in our markets.

Unidentified Participant -- -- Analyst

Have you seen --

Keith Oden -- President

Some numbers around the migration because it is something that we track pretty carefully because it has been a huge part of our story in terms of the 15 markets we operate in. So for 2019, across Camden's 15 markets it's projected that we're going to get an overall in-migration of 447,000 people into Camden's 15 markets. Now within that the thing that's interesting is, we have two cities where it's projected to be negative and one is LA at an out-migration of 54,000. The other is Orange County with an out-migration of about 7,000.

So those are -- that's included in the 447,000 positive. So we have two markets without migration both in California. The other one is, just to Ric's point about Phoenix, so in 2019 LA is projected to have 54,000 out-migration, Phoenix is projected to have 54,000 in-migration in 2019. So it's really an important part of the overall movement of people in large part to lower cost areas and less regulation. And then I think these numbers probably don't get to the impact of the overall (inaudible) limitations on these high property and state tax states. So, it will be interesting to see.

Unidentified Participant -- -- Analyst

That's great color. And then, just my last question. You mentioned that you improved your efficiency on turnover that's reflected in expenses. But if you return back to more normalized and average turnover levels, do you have any sense for how much that could impact expense growth?

Alexander Jessett -- Chief Financial Officer

So we've been at this level of turnover now for a couple of years. We have to do some math around if there was some sort of dramatic increase in move-outs and what the impact would be. But I would tell you at this point, if you sort of looking at trends, the trend seem to be that we are going to have lower turnover for longer base, (inaudible) seen in the last couple of years.

Richard Campo -- Chairman & Chief Executive Officer

Part of our expense control has been, as I mentioned in the beginning of my comments, was our Attack The Run Rate initiative. And what's that about is, it's about focusing on small ticket items on-site and in our corporate office, that sort of just get done because we have been doing them for a long time. And it's really focusing in on and making decisions on a lot of small stuff that adds up to actually a pretty nice number.

And that focus, even though we are focused on our operating expenses all the time, this is sort of intense focus on making sure that every dollar that's going out the door is either a revenue-enhancing dollar or a marketing dollar or one that can be justified from a business perspective. And that's had a really big impact and our teams have done a great job sort of embracing that concept.

I think often times when times are good, you get a little bit, it's easier to have expenses that kind of creep on you. And we're now at a point where our teams have really embraced this Attack The Run Rate and the idea is, it's the run rate, it's not let's just save money this quarter and let's save money this year. Let's make sure it's permanent and then it's in the run rate so that 2019 benefits from it as well.

Unidentified Participant -- -- Analyst

Good stuff. Thank you.

Operator

Thank you. And the next question comes from Richard Anderson with Mizuho.

Richard Anderson -- Mizuho -- Analyst

Hi, thanks, good morning everybody. So Ric or anyone, when you think people are trying to get 2019, I'm going to see if I can get 2020 guidance out of you. So --

Richard Campo -- Chairman & Chief Executive Officer

At least that's novel.

Richard Anderson -- Mizuho -- Analyst

So, what do you think about supply, obviously millennials demand at least changing as they get older, weakish single-family home market and of course interest rates. When you look further out 2018, let's pass 2019 and going into '20 and '21, do you see the business basically better three or four years from now than it is today or is it sort of sideways moving because it's our sense that the days of high single-digit growth at a multifamily REITs even in the best of times is probably over and it's more like a CPI plus type of business. I'm wondering how you feel about kind of all these longer-term observations?

Richard Campo -- Chairman & Chief Executive Officer

Yes, I feel pretty good about our business long-term or midterm. You can't go out more than 20 or 21. But if you think about the business, the fundamentals of the business, we're not getting disintermediated by Amazon. We don't have issues like that. Single-family homes still are hard to get. The average median price of home is up. Incomes are not as high or not growing as much. You have interest rates popping up so it's made homeownership more difficult even though from a demographic perspective we know that it's not so much the money as it is the demographic position of people.

They're waiting longer to have kids and get married and form households, so that would create demand for homes. So with that said, I think our business is going to be reasonably good for the next two or three or four years. And barring any major calamity or recession or whatever, I think also that the pressure on merchant builders and development continues to be there.

And I think that ultimately that you will see a peak in the supply and then the supply sort of coming down in 2020, 2021, 2022 unless we have -- unless it's 3.5% GDP continues and job growth continues and we have more legs up. But so I feel pretty good about our business.

Richard Anderson -- Mizuho -- Analyst

So, 2020 better than 2018?

Richard Campo -- Chairman & Chief Executive Officer

Yes, it's a hard thing to say today but I would -- when people asked me about how I feel about our business over the next three to five years, I feel really good about it. Now if we have a recession between now and then, you know all bets are off. And if something changes dramatically there, if you sort of have -- if you told me that 2018 you have the same sort of supply and demand economics, the same job growth with interest rates maybe up a bit, I would say that those years are going on be good for multifamily.

Keith Oden -- President

So Rich, I would just add to one of the points that you raised which was the weakness in home sales which continues to be really puzzling or at least puzzling to a lot of the people -- to that on the homebuilder side of things. But I think that it shows up in our numbers in the move-outs to purchased home. And conventional wisdom six or seven years ago was that the great recession was a cyclical event and that homeownership rate collapsed as a result of the housing bust and the great recession and that most people, prognosticators I think at the time really believed that the homeownership rate would drift back up, but eventually will back up to the 18% and 19% and in our portfolio that we historically say before 2007.

And it started in (inaudible) the homeownership, move-outs to purchased homes bottomed at about 9.7% in our portfolio which was crazy low and then it started to drift back up. But if you look at the numbers on our portfolio over the last year, it looks like we are getting kind of toppish on the move-out number and we are back down to 14.3%. We got as high as in the low 15s. But we're still so far away from what you wouldn't think of a normal move-out to purchased homes rate in our portfolio that I think you've just got to start rethinking the cyclical versus secular argument in homeownership rate.

And if this is where we are going on be, then the metrics that we need going forward in terms of what the new supply -- how much new supply could be dealt with, how many new jobs that's going to take to maintain the demand for multifamily in the traditional range, you guys got to rethink all of those. So I'm not telling you it's almost never different this time, but it's been really different this time for a long time in homeownership move-outs to purchase homes.

And it looks right now the data started to drift back down. And supported by the fact that I think a week ago or so they announced one of the lowest new home sales or home sale numbers in a decade. So it's an interesting time and I think that Ric's right that if you have to be on one side or other of that argument, I would prefer to be on our side of the argument.

Richard Anderson -- Mizuho -- Analyst

Good stuff, guys. Thanks very much.

Thank you. And the next question comes from John Pawlowski with Green Street Advisors.

John Pawlowski -- Green Street Advisors -- Analyst

Thanks for your comments on the reasonable cadence into development starts. Is $300 million in acquisition volume in next year a fair betting line?

Alexander Jessett -- Chief Financial Officer

We haven't really gotten to that point yet. We sold a lot of properties and really turned the portfolio big time in the last three to five years. So we don't have a lot of low-hanging fruit in term of dispositions. So it really just depends on what kind of market we have next year, but I don't see it being a robust acquisition year given what we're hearing or what we're seeing right now, but we haven't really (inaudible) in our guidance yet.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. Some of the really competitive markets, I think of the Phoenixes of the world, where cap rates -- and I don't know if you agree, are perhaps irrationally low right now. Would you ever do something tactical and not a full market exit, but take another tranche or dispositions to sell into that competitive bid and perhaps reposition into a market outside your current footprint that you think is less or more un-depreciated?

Richard Campo -- Chairman & Chief Executive Officer

Well, ultimately we have exited markets in the past right. We exited Las Vegas kind of at a time where we thought and we knew it was accelerating, but because of the portfolio quality, it was really important for us to move out of that market. We like the markets we're in for all the right reasons and the issue with tactical, it sort of hurts my head a little, on the one hand you can take advantage of low prices, but then what do you do with the capital and the risk associated with the transaction, just reinvestment risk issues.

If I really like the property long-term, it's hard for me to replace that property long-term and I'm taking risk of -- execution risk between getting that done. So we have lots of scenarios that go through, well should we sell our lowest cap rate deals or highest cap rate deals and how does that affect us long-term and when it makes sense to do, we do given that we've sold $3 billion of properties in the last five years and done couple of billion at development and a billion of acquisitions. But, so we look at that and clearly it's -- sometimes it's interesting and sometimes it's not, I'm not sure what we're going to be doing over the next year or two in that regard though.

John Pawlowski -- Green Street Advisors -- Analyst

All right, thank you.

Operator

Thank you. And the next question comes from Hardik Goel with Zelman & Company.

Hardik Goel -- Zelman & Company -- Analyst

Just wanted to get more detail on the expense side, so when you look at taxes, has there been some sort of appeal success or something of that nature that's lowered the taxes as you would have expected them at the beginning of the year and what's kind of your sense of how that's going to trend?

Richard Campo -- Chairman & Chief Executive Officer

Yes. I mean, once again, we started the year thinking that property taxes are going to be up 4.2% and we now think they're going to be up 6%. That delta is entirely driven by higher-than-expected tax values in Fulton County in Atlanta. And so that sort of what we're having with property taxes.

I think if you're looking at year-to-date property taxes and you're trying to understand how we get to the 6%, you can't forget that in the fourth quarter of 2017, we had about a 1.05 million of property tax refunds almost entirely in Houston and that is not going to be replicated. So that's the delta, if you're looking at our year-to-date and you're comparing that to full-year which, once again, we think is still 6%.

Hardik Goel -- Zelman & Company -- Analyst

Got it. That makes a lot of sense, and just one more question on your comments regarding supply. You guys talked about better visibility and you have the ability to see further now than ever before. As you look out, where do you see supply really peaking, where you can say it's going to peak and then decelerate steadily. Is it 2020? Is it 2021? Where does supply go down meaningfully from?

Keith Oden -- President

So, we have numbers out through 2020 and these are Witten numbers. He has got the completions in 2020 across Camden's portfolio basically flat with 2019 which is only slightly down from 2018. So, if you're thinking big picture Camden's platform, 138,000 -- 136, 138 is the progression of Witten through 2020.

I think 2021 and 2022 would be the first years where you could have a shot at meaningfully less deliveries. And that is function of all the push and pull and pressures that Ric has described that the merchant builders are dealing with.

But you know they're persistent and they're crafty and if there is a deal that can get done, they will figure out a way to do it. I just think that the math is getting so difficult. And as Ric mentioned, they're pretty stretched in terms of their total capacity to hold what they have and then start a new round even if they can get the numbers to pencil. So I think it's possible that in 2021 and 2022 you could see a meaningful pullback in supply for the first time in years.

Hardik Goel -- Zelman & Company -- Analyst

Thanks, that's all from me.

Operator

Thank you. And the next question comes from Daniel Bernstein with Capital One.

Daniel Bernstein -- Capital One -- Analyst

Hi, good morning. Just don't want to get too academic but want to follow-up on conversation you had with Rich. Are you seeing any change in the average age of people living in your buildings and maybe the average age of people who are moving out to homeownership?

Richard Campo -- Chairman & Chief Executive Officer

Well, first of all, we are hearing -- seeing anecdotally more sort of baby boomers moving in, and these are people that lived in suburbs whose kids are gone, they live in a big house, traffic is still pretty awful across America. So they are moving into the city and into the urban core. And we have some properties, for example, in Houston and the Galleria that -- where the average age is probably 10 years older than our average age in our portfolio, primarily because the rents are much higher and you have to have somebody in their 50s who are -- who has more income to be able to pay for that high-rent property. And I think one of the things that's driving that to a certain extent is not just the traffic and the desire for people to be more walkable and more closer to amenities like the arch and things like that.

But one of the things over the last 10 years that's really happened in this cycle of development is that the properties are not your 80s, 90s versions of apartments. When those baby boomers walk in, it's like a hotel. All the amenities are just really high end. The finishes are as high end as any for-sale condo. And so the product is more appealing to folks like that today than it was in the past, so it's a definitely a migration.

If you look at the statistics too on propensity to rent, propensity to rent is always very high up until the mid-30s and then it starts falling off, and then you have a propensity to own. And over the last seven or eight years, the propensity to rent has increased for people over 50 and into their 60s, and that is the -- that is a change. Fannie Mae actually just did a study that you can find on the NMHC website, or Fannie Mae website that shows the increased propensity to rent for older people. And I think that's definitely a positive for our business, there's no question about that.

In terms of average age, I think it's pretty much -- hasn't really changed dramatically maybe a year or so here and there. And then in terms of people moving out to buy houses, that -- because it's so low today, the age is definitely increased for people to buy houses, because they have student debt they have to pay off and issues like that have limited their ability to buy a house.

Daniel Bernstein -- Capital One -- Analyst

I didn't know how much you track that specifically relative to the current situation, so just asking about that. The other question I had was -- involves the -- you had a conversation on the growth cap rates, and I agree with everything you said that interest rates are kind of the last thing that are going to move cap rates. Have you seen increase in leverage that buyers for that wall of private equity is using to get their IRRs? I mean, it's easy to track the GSEs, it's easy to track the banks, it's not as easy to track the actual LTVs that are in the non-bank financials out there. I don't know if you had any thoughts on whether leverage is increasing, LTVs are increasing for those private equity buyers.

Richard Campo -- Chairman & Chief Executive Officer

I think the answer is no. I think that the leverage is not increasing. People aren't using more leverage to get yields. As a matter of fact, there's a whole lot of very low leverage and no leverage buyers in the marketplace, where they're not putting any debt `on the property. So, I do think, as far -- when they do leverage, more than half of all the loans that are getting done in multifamily are floating rate loans. And when you look at the forward curve on LIBOR, for example, you can buy really cheap caps, so people are -- on a relative basis, so people are floating more than they're fixing, and their leverage levels are not as high as they -- as you would normally expect.

Daniel Bernstein -- Capital One -- Analyst

Yeah. And I was just thinking it would be going up at this point in the cycle given where cap rates are. But that's good color. I appreciate it. I'll hop off.

Operator

Thank you. And there are no more questions at the present time. So I would like to return the call to Ric Campo for any closing comments.

Richard Campo -- Chairman & Chief Executive Officer

Great. We appreciate you being on the call today and we will be in -- at NAREIT in the next couple weeks, and I'm sure to see a lot of you there. So thank you very much, and see you at NAREIT.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Duration: 68 minutes

Call participants:

Kim Callahan -- Senior Vice President-Investor Relations

Richard Campo -- Chairman & Chief Executive Officer

Keith Oden -- President

Alexander Jessett -- Chief Financial Officer

Nick Joseph -- Citi -- Analyst

Shirley Wu -- Bank of America -- Analyst

Hardik Goel -- Zelman & Company -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Austin Wurschmidt -- KeyBanc Capital -- Analyst

Richard Hightower -- Evercore ISI -- Analyst

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Robert Stevenson -- Janney -- Analyst

Unidentified Participant -- -- Analyst

Richard Anderson -- Mizuho -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

Daniel Bernstein -- Capital One -- Analyst

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