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.