2012 Rental Outlook

The stars are aligned to make 2012 an extraordinary year for rental income.  The decline in homeownership is translating into rising rents and the multifamily apartment sector, though booming today, was late catching the wave.  If it weren’t for the new investor-driven single family rentals in many markets, rents would be zooming even higher than they already are.

The New Normal in Homeownership Creates Demand

Changing attitudes towards homeownership have been pushing up rental demand since 2004, before the housing bust.  The number of homeowner households declined by 805,000 from 2006 to 2010 and the number of renters rose steadily for six consecutive years, increasing 3.9 million during that period, according to Census data.  The net increase of in 2012 alone was 1.4 million new rental households, a 1.5 percent decline in the national homeownership rate and a 4 percent rise in the number of tenants.

Much of the rental demand is from younger households that are postponing or even canceling homeownership in favor of renting.  The decline in the homeownership rate has been sharpest for those household heads under 30 years of age.  Owner rates have fallen by 4.4 percent (to 21.9 percent) for those under 25 years of age and by 7.0 percent (to 34.7 percent) for those aged 25 to 29 years, according to Freddie Mac.

Multifamily Struggles to Keep Up

Multifamily rental housing can’t keep up with the demand.  Census Bureau reported that third quarter vacancies for rental housing were only 9.2 percent, 1.4 points lower than a year ago and .5 percent below the first quarter.  We haven’t seen a 9.2 percent vacancy rate since 2003.  A Reis Inc. survey of professionally managed buildings in metropolitan markets found vacancy rates stood at 5.9 percent during the third quarter, the lowest since 2007 for that class of apartment.

Apartment developers and investors are a conservative lot and they took a wait-and-see attitude towards the rapid and dramatic changes in the rental market.  Now, however, things are popping.  In November starts of residential developments with two or more units saw a 25.3 percent increase from the previous month , the construction of apartments, town houses and other multifamily developments, evidence that rising demand for rental housing has encouraged developers to begin building again. Newly issued building permits, a gauge of future construction, climbed 5.7 percent in November from a month earlier to an annual rate of 681,000, a 24.3 percent increase from November 2010 and the highest rate since March 2010. The overwhelming majority are for multifamily units.

Even so, developers can’t keep up. Two-thirds of developers surveyed in the third quarter by the National Multifamily Housing Council said construction activity is underway, and 20 percent are breaking ground on new projects at a rapid clip.  The other 47 percent reported an increase in pre-construction activities-acquiring land, lining up financing, getting building permits-but not much actual construction yet.  Yet even with this increased activity, more than half (54 percent) think new development remains considerably below demand.

Single Family Fills the Void

In the dorky world of real estate economics, single family rentals are the newest kid on the block.  Just recently have databases serving the residential investor tracked single family apart from multifamily, but it’s very clear that in many markets today single family rentals are taking up the slack.  From 2005 to 2010, single-family rentals grew at 21 percent versus just a 4 percent increase in total housing units, according to Zelman Associates.

Read More . . .

2011 Was a Good Year for the Real Estate Market

Recent headlines about the national housing market certainly seem to be in conflict with one trumpeting "Good Signs for the Real Estate Market" and another "Home Prices Down in Most Cities." Or how about "New Home Construction Bounces Back - Soars 9.3 percent in November" versus "Home Sales Remain Weak."

And to add to the confusion, the National Association of Realtors just revised its annual home sales report knocking down annual sales 14.3 percent from 2007 through 2010.

The original report showed 4.9 million existing home sales for 2010, and the revised figure is now 4.19 million. The good news is that the seasonally adjusted annual rate as of November is now at 4.42 million homes which is a 12.2 percent improvement over the 3.94 million pace in November 2010.

New single-family home construction probably will total 440,000 for the year, the lowest level in the 50 years that records have been kept but home construction overall is up as apartment construction has doubled in the last year.

Read more . . .

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Real Estate News

• Rate on 30 yr Mortgage Down to 3.91%
• Commercial Real Estate Sales to Increse 25%
• Unemployment Rate Lowest in 3 Years

Listings

• Homes for Sale
• Homes for Rent

Top 10 Real Estate Predictions for 2012

• Continued low interest rates
• Home prices stabilizing and starting to rise
• Increasing numbers of home sales
• Rising inventories, mostly due to increased foreclosures
• Distressed properties will make up about half of all sales
• An improved Short Sale process to help avoid foreclosure
• Homeownership rates continue to fall
• Foreign and domestic investors will buy 25% of homes
• Increasing reliance on real estate agents
• Increased use of Mobile and Social technologies

We are Busy!

Lori Corken and Company is kicking off the new year with an increase in leads and listings. Take advantage of this uptick in business and get your home listed today!

Whether you are looking to buy, sell or rent, Lori Corken and Company has you covered.

Top 10 Issues for Commercial Real Estate in 2012

• Globalization of CRE
• Macroeconomic Fundamentals
• CRE Fundamentals
• CRE Lending
• Commercial Mortgage Backed Securities
• Real Estate Investment Trusts
• Private Equity
• CRE Deal Flow
• U.S. Residential Market
• U.S. Residential Mortgage Market

Top 10 Reasons To Rent Your Home Instead of Selling

• Protect Your Home as Your Largest Asset
• Free Yourself from Current Debt
• Renters Become Buyers
• After a Year, Rent Becomes Income
• Property Managers Will Care for Your Property
• Someone WANTS to Rent Your Home!
• Don't Sell Your Home for Pennies on the Dollar
• You Get to Move on with Your Life
• You Are Not Alone
• We Are All in This Together