A flood of new properties only means great news for Property Managers

Why Tenants & Property Managers  can feel the flood 

In the last 12 months many real estate markets have rebounded at an astounding rate.

Home values have soared off the charts in many places; mortgage rates have risen from their shallow graves and negative equity has plummeted at an unprecedented pace.

Mortgage rates are predicted to increase steadily and reach 5% or more by the end of 2014, home ownership rates are forecasted to fall to their lowest point in nearly 2 decades, with home values increasing by nearly 3%. For renters this news is fantastic.

The rise in home prices, home inventory and mortgage rates doesn't necessarily mean that prices will rise aggressively. Right now the country is in a general state of stagnant rate growth due to poor wage and job growth. This means that while new construction is hitting a stride, property owners are limited with the amount they can realistically raise rents and dormant property is a drain on resources. New construction of single family homes has all but halted in the wake of multi-family buildings that consist of 40 units or more.

 Nearly 170,000 multi-family rental units are estimated to flood the market by the end of 2014 and in order to justify their existence, job growth needs to increase so demand can meet supply.  Homeownership, on the other hand, is due to plummet to 65% or less by the end of 2014; this is again due to the low wages and high un-employment.

Many Gen Y-ers are re defining the American dream of owning a home, due to the financial and employment hardships they are currently facing. Maybe the tradition will come back, however with rental properties becoming more luxurious and expansive with each new construction, the future may look more like a stacked utopia filled with loved-ones for many young people.

 Also, many young people are seeking out opportunities in cities such as:  Atlanta, Dallas, Denver, Houston and Portland. These cities are major hubs with lower rents in many places.

The trend for young consumers is definitely skewing towards making better decisions with money for the foreseeable future and renting a property  seems to be the best option, for now.

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Playing chess with Rental property leads to much wiser investements

Why playing chess with Rental property leads to much wiser investements

Many people of Gen-Y are finally finding their sea legs after the recession; jobs have become less stagnant and as such incomes haven’t risen. A percentage of these young adults are trying to catch up to the playing field expected of them by their Baby Boomer parents by securing jobs, housing and starting families. However, these days the dream of owning a house with a white picket fence is nearly inconceivable to the college grad struggling to find footing. The trends are skewing towards a future population that will perceivably rent their homes for a much longer period of time before deciding to take the home owners plunge. (If at all)

                One advantage to renting a home is that there are no payments that have zero return on interest, for example: closing fees, mortgage interest, property taxes, home owner’s insurance and maintenance. All of these can stack up and make owning a home a financially laborious task. Fidelity investments indicated that stock investments over the last 45 years netted 4.6% higher returns on investments than real estate. Ideally Gen-Y renters stand to make more money over the long run by leasing homes and investing their saved income in stocks.

                Another common myth is that home ownership is prudent because mortgage interest is tax –deductable. According to the advocacy group the National Multi Housing Council, this only true for half of home owners. Unfortunately for the other half of home owners, even with mortgage interest and property taxes their total deductions do not exceed the standard federal tax deduction which is $10,900 for couples and $5,450 for singles.

                With the job market in flux, the flexibility afforded with renting over owning is immense. Typically property must appreciate by 10% to recoup sales costs and on average that takes 5 years. However, jobs and markets are ebbing and flowing, potential buyers may need to relocate and in doing so find themselves in a precarious situation. Also, new condos and multi-family homes in many cities heavy with construction have found a vacancy rate of 2.5%. Many Investors in these areas have slashed apartment rates in order to generate interest. Some of these places are offering up to 3 months rent free and also provide amenities otherwise un-affordable to new home buyers.

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Rent or buy? It’s a question that only the individual can determine.

Rent or buy? It’s a question that only the individual can determine. 

As of December 2013, existing home sales had risen to the highest point in seven years and median prices continued to show strong growth. However, over the last year rental property prices have gone down .23% and over the last three years tenant pricing has gone down 1.23% on average. 

This is a pretty strong trend towards rental property across the board becoming more affordable. So, the next question is: when is the best time to start looking for a new place before turning in the keys on the old one? This is a difficult question since there are many variables that can determine how long the process takes. For example, is the place currently uninhabited?

What about your backgroundcheck? Is it clean? Background checks can take as long as the people performing them allow. Many rental properties have shifted their process to utilize one stop background checks in order to speed up the process. 

The general consensus is that a little over a month out from moving day is probably ideal. In the rental business the sooner the property is filled, the better. That means that generally speaking, all of the pressure is on the renter. They need to get packed, forward the mail, organize movers and moving trucks, etc. which can certainly be an arduous task. 

Statistics show that 1 in 6 Americans move every year, most American will move at least 11 times in their lifetime; that is a huge chunk of time preparing to pull up stakes only to do it again in a few years.

 It would behoove most Tenants  not to stay in one place for a while, get the most that they can from the lower rental rates and then try their luck in a different place. 

Statistics from www.trulia.com

Understanding the USA Rental Market 2014

Rental property is up 2.8% over prior year and up 14.2% over a 5 year period.

With sales down in most regions and an influx of rental properties, the typical tenant screening process is no longer enough to meet demand. In order to stay competitive in an ever expanding market, one has to go with the flow and find new and innovative ways to increase productivity in order to meet demand. Nearly every enviable market is projected to see an increase in rental activity in the coming months and many property managers are turning to one stop tenant screening services.

These services provide immediate access to rental history, credit scores, nationwide criminal records searches, bankruptcies, medical collections and employment summaries. In a series of short steps, the website affords landlords or property managers the chance to effortlessly access important information about possible tenants for their rental properties.

Consumer optimism is projected to surge in 2014 with the recession fading into the distance ever so slightly. However, there are still many obstacles for would be homeowners that could put a hold on those picket fenced desires.

58% of adults aged 18-34 find saving for a down payment on a home to be nearly impossible; 33% have poor credit history and because of these factors they will be unable to qualify for a mortgage. This leaves the rental field open for these would be home buyers and for property managers to be inundated with prospective renters.

With credit standards loosening many single-family renters may see the opportunity to become home owners again. This trend could lead to fewer homeowners being foreclosed on in the future and thus the cooling of single-family home rentals. The trends show that multifamily homes make up an unusually high share of new construction.

These Multifamily homes will be the first stop for many 18-34 year olds who have been able to locate steady work and are ready to move on from their parent’s house.

This shift shows more demand for multifamily home rentals with the demographic opting to start their lives and raise their families as renters. Ironically, this shift is both good and bad for the housing market: good, because the uptick in multifamily housing construction is a sign of housing recovery; bad, because the rate of homeownership is projected to decline in the coming years.

Many markets have been saturated with foreclosed properties and have been over-valued from the start.

Though these places may not be ideal markets for ownership, they are rife with possibility for property management and renters alike.