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Residential rental prices skyrocketing – housing recovery?

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Good news for landlords, bad news for renters as U.S. Census Department and Rent.com agree that double digit rent hikes are on the way across America. Traditional news outlets point to this as a sign of economic recovery, we point to it as a sign of the opposite.

Vacancy rates have remained around 10% over the last three years with predictions of 5% vacancy by next year, and with the continuing housing crisis, existing landlords (especially multifamily) are in a good spot- consumers lack confidence in housing and financing is tough, making renting more common. This does not spell economic recovery, it simply spells landlord luck.

The stigma around renting is fading across the board and Realtors who used to be apartment locators are returning to their old stomping grounds despite locator fees having dropped substantially over the years (and most multifamily not paying on send only).

Rent spikes

For the last decade, national rent increases have averaged 1% each year and in hot spots, we’ve seen 5% increases quite regularly, making a projected national average of 10% straining on the rental population- here in Austin, we’re seeing some 17% rises and in Boston 30%, leaving some renters in a non-qualifying status, forcing unexpected moves.

In the last six years, 1.2 million American adults have moved back in with their parents. We expect to see that number rise as double digit rent increases set in. We anticipate local tenant councils will be very busy over the next few years as renters are caught off guard by such spikes.

Property owners and multifamily managers will take advantage of this situation to improve cash flow as the housing crisis continues and renters who are scared of buying will have their fears reinforced as they rarely see the difference between the rental sector and the housing sector (they’re all scary now).

Economic recovery? Absolutely not- rapidly rising rental rates point out a weak spot in the market, not strength. Moms and dads of America- you better get the guest room cleaned up, the kiddos are moving back in. It won’t last long though, as this is the unfortunate first step and first bubble on the way to recovery.

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21 Comments

21 Comments

  1. Adam Burdick

    March 15, 2011 at 1:22 pm

    Actually for the most part the double digit growth are in areas where rents are just correcting themselves. Let’s not forget that for the past 2 years rents across the board have been rapidly declining. Some places in sub-markets of Dallas and cities like Slat Lake City have seen rental prices drop by anywhere between 35-50% since 2008. With that said, current rental prices in most US cities have yet to return to where they were in January of 2009.

    Granted the rental industry is in a very good position as 1. home ownership is harder to get and 2. New apartment construction is at a record low has created a “perfect storm” as Supply is limited and demand is growing. However, I would still argue that rent increases are a sign of economic recovery. As the first places hit hard during an economic hardship are one bedroom apartments/townhouses/condos as people start to either move home, or get a roommate (or even stay in bad relationships), in an effort to control costs. Now that there are more jobs and work hours are increasing people are feeling more and more comfortable about getting their own place.

  2. Krista Lombardi

    March 15, 2011 at 9:57 pm

    Wow! San Diego saw 28% cash sales in January and 30% cash in February too, hope that too many people don’t wait too long…

  3. Dave Kinkade

    March 16, 2011 at 8:28 pm

    Renters have been absolutely spoiled the last five years as more and more landlords were forced to compete against one another and slash their asking rental prices. This isn’t some sort of bubble – it is merely a correction to help restore balance to a once-deeply skewed renter’s market. Units in Tampa that were renting for $900 a month two years ago are easily getting $1,100 these days.

  4. Jennifer

    September 19, 2011 at 2:32 pm

    You guys must all be landlords! This article is right on. Rents are increasing and will continue to increase as long as people are afraid of home ownership. It is a great time to be a landlord! There are tons of cheap properties on the market just waiting for lucky investors to scoop them up. As an added bonus, every time a landlord purchases a condo, it makes it harder for an aspiring homeowner to get financing towards purchasing another condo in the same complex- bringing prices down even further. It is a dangerous cycle which could lock many people out of home ownership.

    Last year, I was renting a miserable little apartment for 750 dollars a month. My building was infested with bedbugs and had serious mold producing plumbing problems. A faulty HVAC system resulted in doubled electric bills. I moved out- that rent skyrocketed to 843 dollars (for a pretty nasty, cinder block apartment with cheap appliances). Good luck to the guy who now lives there. I now own my own home and am paying 572 a month in combined mortgage/insurance/taxes.

    Now is a fantastic time to buy a house. Taxes may rise, but your fixed mortgage is forever (or almost literally so). The trick is to find a little house that you can easily afford and not to purchase a home that is at the top of your price point. There are tons of these little Cape Cod style houses for sale. Because they tend to run around 1000 square feet and have usually a single bathroom, they are considered to be obsolete by many prospective home buyers and so are being sold dirt cheap. For a single person who plans on staying in the area and would otherwise be renting they are fantastic. They have more than enough space and tons of potential. Not only can you ditch your apartment, but you can ditch any studio, storage or community garden space that you might now use. They are also easily rented out…. if you decide to convert to the dark-side.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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