A Summer of Rental Discontent

June 21, 2012

 A slow down in apartment construction, coupled with low vacancy rates and a rising millennial demographic will continue to fuel a rise in apartment rents this summer.

According to Trulia, a company that tracks rents and home prices, it now costs more to rent than to own a home in 98 of the top 100 U.S. metropolitan areas.

Moody Analytics reports that demographics has become a leading factor in more people renting then buying, and “demand for rent will remain solid over the next two years.”  While the overall rental rate is 35%, the renter rate for those between the ages of 25-29 is nearly 65%, and for those under 24 years old, it is 77 percent, according to the Census Bureau.

On the single-family home stage, the rental craze has made it frustrating for the homebuyer. Inventory of “decent” homes is being depleted as investors snatch up single-family homes for the purpose of renting them out. Those left on the market are receiving multiple offers, resulting in bidding wars.  And prospective buyers with FHA loans are finding out that their loans may require sellers to do more home repairs than other loans. Subsequently, if a seller receives multiple offers, they may avoid the ones with FHA loans.

Prospective buyers are also losing homes to cash buyers and bidders with bigger down payments.

This is all playing into the hands of investors who surmised a couple of years ago:  “Accumulate hundreds or thousands of homes, rent to the 99% and make a killing when they dump them back on a property-starved market in three to five years,” according to Personal Real Estate & Investor.

Treat your renters like family – they may never move out

October 19, 2010

Whether it’s fallout from the housing market crash or simply that there isn’t enough money to go around, a new survey that shows more than 25 percent of renters have no plans to buy a home means property managers must treat tenants as long-term assets as opposed to transitory income.

Gene Bennett, founder/president of All American Management in Longwood, Fla., says in response to this new shift in behavior companies like his must adapt by re-examining the way they market to and retain tenants.

“With long-term commitments, it makes good business sense to offer added incentives to clients,” Bennett explains. He says it also behooves property managers to beef up customer service since long-term renters offer more positive, stable cash flow.

The aforementioned survey, conducted by Harris Interactive for Trulia, a website service for people looking to buy homes, found 27 percent of renters never plan to buy a home, and two-thirds of those who do plan to purchase one will wait more than two years. When asked what could influence them to buy a home in the next year, the top three responses were the ability to save for a downpayment (47 percent), getting a new job (28 percent), and low or lower interest rates (27 percent).

The survey’s results seem to mirror what is happening in America’s home-flipping market as well. With even less buyers for homes, according to the National Association of Realtors, only 4 percent of transactions this summer were for homes owned less than a year.

Future is Bright for Housing – Get Out Those Shades

May 6, 2009

Take a guess the age more people are today than any other age in the United States? If you guessed 49, pushing 50, you’re right, according to the folks at the National Association of Home Builders and MetLife Mature Market Institute.  The association recently addressed this age group at the NAHB’s Building for Boomers and Beyond 50+ Housing Symposium in Philadelphia, because this bodes well for the housing industry. These 49-year-olds are next to join the 50-plus market, a demographic that surveys say are posied  to move and will be seeking smaller, aging-in-place homes.

I am not sure why I was so intrigued to learn this age-fact tidbit, but my guess was more in the 20s or 50s. The number two age? Nineteen, which is even better news for housing: In a few years, those college grads will also be seeking their first home, and they, too, will want something smaller, just not necessarily an aging-in-place home.

Let’s look at the sheer overall numbers of the next wave of homebuyers. Greg Logan, managing director for the Orlando-based Robert Charles Lesser Company, notes there are around 76 million baby boomers in the United States and some 88 million representing Generation Y, those born between 1981 and 1999. 

With these two behemoth demographics poised to buy real estate in the near future, some builders are already reacting. K. Hovnanian, according to the builders association, has been downsizing some of its homes, starting as small as 1,100 square feet, down from a minimum of more than 1,500. And there will be a lot of takers.

The point here is that both generations make up more than 50 percent of our people. That equates to more than 160 million consumers on the loose spending money as this recession subsides, and besides just wanting cars and jeans, they will be looking to buy homes. Lots and lots of homes.

Got your shades handy?