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Real Estate Big Data

Are rentals winning the war for millennials? Is a “rentership society” inevitable?

Some think rentership will be permanent for a segment of the market, so we look at the endless data behind these claims.



In 2011, during the high water mark of the foreclosure flood, an analyst at Morgan Stanley named Oliver Chang foresaw a sea change in the way Americans are housed. He coined the term “rentership society” to describe how the nation was moving from away from the culture of homeownership. Six years later, despite a vigorous housing recovery and the coming of age of the largest generation of potential homeowners, Chang’s vision is coming true.

Is the millennial miracle running out of time? Every year that passes with too many Millennials still living in rentals is another year without the sales, commissions, and new mortgages that demographers promised.

Two years ago, 2015 was to be the Year of the Millennial. Then, 2016 was to be the REAL Year of the Millennial. No one has yet shown the chutzpah to name 2017 yet another Year of the Millennial. Is a window of opportunity is closing?

Are the bulk of millennials missing ideal conditions for homeownership that they will ever see again: relatively affordable prices in the wake of the housing crash, low-interest rates, and soaring rents?

Some hard numbers:

  • Though total home sales have flourished, the first-time buyer market share began to shrink in 2013 and today seems to be stubbornly stuck at 30 percent, the lowest level since 1987.
  • Millennials have had little if any impact on the homeownership rate. After a minor uptick during the last two quarters of 2015, the national homeownership rate resumed its eleven-year decline to 63.5 percent, just one-tenth of a percentage point above last year’s 48-year low.
  • Younger age groups are leading the homeownership decline. Homeownership among those 35 and younger fell from 47.5 percent to 39.2 percent from 2007 to 2015.

The worst may be yet to come. Real estate economists at the Wharton School of Economics are forecasting a further decrease in homeownership to 57.9 percent by 2050, but they believe it is possible for the homeownership rate to decline from current levels of around 63.5 percent to around 50 percent by 2050, 20 percentage points below its peak in 2004. Demographics, credit conditions, and the relationships between rents and housing cost increases account for the gloomy prognosis.

Millennials with homeownership dreams have endured much. The Great Recession sent many to live with their parents. Lenders responded to the financial crisis they helped create by raising lending standards to protect themselves at the expense of first-time buyers Investors have converted more than 5 million homes into rentals and are still looking for more. Move-up buyers can’t move up because either they lack the equity to sell or they can’t find an affordable home to buy.

Time will lower most of these barriers. New homes will slowly replenish inventories. Equity will return to even recovering markets like Las Vegas and Phoenix where foreclosures ravished home values most.

One huge barrier that time won’t fix is the rising cost of entry into homeownership. To young families struggling to keep their housing costs under control, home prices are rising too quickly. Since the first quarter of 2012, the median asking price for a home has increased 20.6 percent, according to the Census Bureau. Prices of affordable homes in lower price tiers have increased much more, especially in hot markets. During the same period, rents have skyrocketed. Over the past four years, the median asking rental prices have risen 46 percent per unit. Draconian rent increases have become a major motivation for millennials to buy. However, it’s much easier for supply and demand to lower rents than home values.

The multifamily construction boom

While first-time buyers have been stuck at a 30 percent market share, demand for rentals has boomed. Rental demand has increased by nearly 9 million households from 2005—the largest gain in any 10-year period on record. The share of all US households that rent, rose from 31 percent to 37 percent, at the expense of homeownership.

The record-breaking demand is about to meet record-breaking supply. When the bulk of the millennial generation started looking for rentals, developers and investors took note and began the greatest apartment building boom of the past 50 years.

Siting, permitting, and construction of an apartment building take 11 to 13 months, depending on the size. Buildings that were blueprints in 2013 are now opening for business. Last year, completions soared, reaching 306,000 multifamily units, the most new multifamily construction to come online since the peak of the Baby Boomer boom in 1987. Permitting for new multifamily continues to climb, up at a nearly 17 percent average annual rate through the third quarter of 2015, suggesting that as many or even more new apartment units will open for business in 2016 and several years beyond.

From 2005 to 2015, the total rental housing stock expanded by approximately 8.2 million units, about the same as total existing home sales over a year and a half. New multifamily construction was responsible for roughly a fifth of this increase, conversions of single-family homes from owner-occupancy and other uses accounted for the lion’s share of growth.

Some 5 million homes, largely the affordable starter home that is so in demand by millennials today, have been converted to rentals. Even though the foreclosure era has ended, conversions continue as investors profit from rising rents and appreciation. Investors’ monthly market share currently is about 14 percent, nearly half as much as first-time buyers.

Cracks are showing in rental rates

Rentals are soaking up much more demand that ownership properties, but cracks are beginning to show, suggesting that we are the cusp of a sea change in the dynamics of rentals vs. ownership. Home price appreciation is continuing to accelerate, surpassing forecasts and rising 5 to 7 percent this year, while the massive investments in new rental capacity are starting to show in the marketplace.

Rental growth has been slacking off since the second quarter of last year. Annual effective rent growth fell to 4.1 percent in the first quarter of 2016, an 89-basis-point decrease from the 5.0% a year ago and 52 bps lower than the 4.6% reported in the fourth quarter of 2015.

effective rent growthRent growth has been moderating since the middle of last year. Source: Axiometrics
zillow rental dataZillow’s analysis shows home values outpacing rents this year.

MPF Research reports that they are seeing definite signs of cooling in certain markets, including the Bay Area, which has been the nation’s hottest apartment market for this cycle but is recording several months of easing rent growth numbers. Here’s analysis showing where rents are slowing in the hottest for sale markets (below):
america's hottest markets 2016 q1Sources: S&P Case-Shiller and Rentonomics.
*Price increases are January 2015 to January 2016. Rent list increases are April 2015 to April 2016

As strong as rental demand is today, it’s likely that new construction and continued conversion of single family homes into rentals will result in overbuilt markets, a chronic problem in multifamily housing. Rents are certainly going to flatten within the next few years, and even retreat as capacity outstrips demand.

Will cheaper rents usher in the “rentership society”? Or will they simply make it easier for those millennials committed to homeownership to save for down payments and bide their time in the hope of finding entry-level homes in their markets? For many young families, reasonable rents may leave them with no other option.


Steve Cook is editor and co-publisher of Real Estate Economy Watch, which has been recognized as one of the two best real estate news sites in the nation by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, Cook was vice president of public affairs for the National Association of Realtors.

Real Estate Big Data

Cities and states where renters eviction protection policies are still in place

(REAL ESTATE BIG DATA) Even though the national eviction ban has lapsed, 7 states and over 20 cities still have policies in place for renters eviction protection.



UnTil Debt Do Us Part representing renters debt

Half of the renters in the United States still have some protections available due to the coronavirus pandemic.

Many of these renters were those who were tenants before, during, and “after” the pandemic though the effects are still lingering. Some new renters have had to enter the expensive rental market scene after being discouraged when attempting to buy a home. Those that are over the bidding wars, rising prices, and dwindling options are stepping out of the home buying process and are opting to rent instead, driving rental prices sky-high. It’s a lose-lose situation either way.

The Supreme Court ruled in August 2021 that the national moratorium on evictions was overreaching, even though the policy had been in place since September 2020. In response, many states and cities are setting their own limits.

Even though the national eviction ban has lapsed, 7 states and over 20 cities still have policies in place for protection. More than 15% of renters are behind on payments with the average debt owed is $3,700. Though in some areas, the debts amount to $10,000 per household.

New Jersey and New York tenants can’t be evicted until the new year in most counties. In New Mexico, renters also can’t be pushed out for late payments, but the end date for that protection has not been established.

In Connecticut and Virginia, landlords can’t evict tenants who have applied for federal aid. In LA, the eviction protection ends January 31, 2022, in Austin, TX, December 31, 2021, and in Seattle, January 16, 2022.

In Oregon, Massachusetts, Michigan, Minnesota, and Washington D.C., eviction proceedings are paused for those that have their renter’s federal assistance application pending. In Nevada, showing that you’ve applied for rental assistance is considered a defense against eviction until June 2023.

$45 billion in aid is allocated by Congress for federal rental assistance, but less than $13 billion has been used so far.

If you are still in need of assistance and don’t reside in any of the areas above, consult location advocates and learn your rights to see what protections are available to you.

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Real Estate Big Data

5 ways AI is shifting real estate and how to capitalize on it

(REAL ESTATE BIG DATA) Artificial intelligence is bringing a seismic shift to commercial real estate in everything from investing to sales to property management. Hold on!



Woman working at desk with multiple desktops open to AI tools.

Forget about that location thing. Now real estate – especially commercial real estate – is about data, data, data. As in, Really. Big. Data. And AI is owed a large part of the credit for that.

A dizzying amount of data is being crunched and sorted and searched by artificial intelligence-enabled tools that are changing how deals get done and who will still have a job in the future.

The promise of AI to use data to predict the future is massive – and it promises to do that with more accuracy and efficiency, greater productivity, and less cost for commercial as well as residential real estate.

So, what, exactly, can AI do for commercial real estate? Let’s break it down.

What AI is

To put it simply, artificial intelligence is what lets Amazon’s Alexa talk to you and cars drive themselves. Its algorithms use data to mimic human intelligence, including learning and reasoning. Then there’s machine learning, where algorithms analyze enormous amounts of data to make predictions and assist with decision making. We’re putting them both under the same AI umbrella.

There are four main areas where AI is remaking the commercial real estate industry: development and investing; sales and leasing; marketing; and property management.

Development and investing

With its ability to quickly analyze a staggering amount of data, AI lets investors and developers make better data-driven decisions. More responsive financial modeling helps identify ideal use cases and project ROI under multiple scenarios using real-time data. Pulling in alternative data – say, environmental changes or infrastructure improvements – goes beyond traditional data points and can identify investment opportunities, such as neighborhoods beginning to gentrify. In fact, alternative, hyper-local data has become even more important as COVID-19 continues to upend property valuation models.

AI’s crystal ball comes from recognizing patterns in the data and continuing to learn from new information. It can forecast risk, market fluctuations, property values, demographic trends, occupancy rates and other considerations that can make or break a deal.

And it does all of this more efficiently, more accurately and less expensively than manual methods.

Sales and leasing

There’s a big question looming over AI and automation: Will technology put real estate brokers out of business? The short answer is, “No, but brokers need to step up their tech game.”

Keeping up with – and being open to – tech trends is essential. Clients’ ability to use online marketplaces to search for or list property will only grow, but there still is no substitute for expertise and the personal rapport that builds trust. Chatbots can’t negotiate (yet). Robots can’t show a space and weave details about the property into a story. (If you want to know more about using storytelling in real estate, check out this great marketing guide.)

But Big Data is such a powerful tool that brokers need to know how to harness it for themselves. Having more, and more nuanced, data about clients and properties means brokers can better match the two. They can be more confident in setting sales prices and rental rates. Becoming a “technology strategist” to help clients design an automation strategy for a property would be a great value add to their services. Even just starting out with a website chatbot to answer common questions would add a level of tech-savvy efficiency to communication with clients and prospects.


Also a boon of Big Data for brokers: more sophisticated, targeted marketing for themselves, as well as for client properties.

Integrating AI with customer relationship management (CRM) tools brings a richer understanding of clients and prospects that can make choosing marketing channels and personalizing targeted content more precise.

Then there’s data-driven lead scoring. Property intelligence firm Reonomy says its commercial data mine – 52 million properties, 100 million companies, 30 million personal profiles, and 53 million tenants – can be searched in multiple ways to create custom prospect lists. (Check out’s “5 Ways Artificial Intelligence is Transforming CRMs” for a fascinating list of what AI can do, including analyzing conversations for sentiment analysis.)

Property and facility management

The Internet of Things (IoT) is already helping property and facilities managers control and predict energy costs, as well as proactively address maintenance issues. Integrating smart technology like thermostats and sensors with AI also means more efficient space planning. Smart security cameras and wi-fi tracking can create “people heat maps” that can identify underutilized or overcrowded areas.

IBM’s TRIRIGA does that and more. Part of the Watson project, TRIRIGA offers AI-driven insights to show how people are actually using a space and ensure a company has the right amount of space in the right areas. It can also analyze common questions from a chat log, then use that data to create an AI virtual assistant to automatically answer those questions – and update itself as it learns new data. Maintenance requests, room reservations and more can be fully automated.

Strategic space planning has become even more important during the pandemic, as work-from-home trends and safety concerns reshape offices as workers return. (Need ideas for your office? IBM’s Returning to the Workplace guide might be a good place to start.)

Barriers to adoption

There’s no question tech-enabled commercial real estate companies will have a competitive edge. The question is, when will more of them agree enough to adopt AI more widely?

PropTech with and without AI has exploded over the past few years – and that’s part of the problem. In an Altus Group survey, 89% of CRE executives said the PropTech space needs significant consolidation before it can effectively deliver on industry needs; 43% said that is already underway or will occur within 12 months.

Then there’s the undeniable learning curve that comes with any tech tool – an investment of time as well as money. The survey also showed concerns about regulatory requirements for data collection and management, having enough internal capacity, and nonstandard data formats.

Despite those perceived barriers, there’s also no question that innovation and disruption from AI are moving at a dizzying pace – and that commercial real estate needs to keep pace.

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Real Estate Big Data

Supply crisis hits housing – starts and permits fell in September

(REAL ESTATE) New data from the Commerce Department shows a dip in permits and starts, but if you look closely, multifamily is carrying that weight, so how is single family production going?



family in their living room with moving boxes during the competitive housing market

Last month, housing starts fell 1.6%, which is only a slight dip, but permits fell 7.7%, and the gap between units completed and those still under construction is the largest on record, according to reporting from the U.S. Commerce Department.

While starts and permits hit a year low and while labor shortages, supply chain issues, and rising prices of raw materials, it should be noted that single-family starts actually remained unchanged, and permits for single family homes only fell 0.9%, so what we’re looking at here is a slowdown in the multifamily sector as sales heat up in single family housing..

Another factor at play here regarding still-tight inventory levels is the federal mortgage forbearance program as a response to the pandemic. As the program wraps up, more inventory will come online.

Dr. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR) explains: “The current mortgage default rate of at least three months is running high at 3.5% compared to less than 1% before the pandemic. However, foreclosures have been at historic lows so far due to the forbearance support. The default rate will certainly fall as long as the economy continues to generate jobs, but the end of the federal support program inevitably means some homeowners will need to sell. This will be another source of housing inventory.”

Because tight inventory levels have kept the market restricted and sales below what demand is, the residential real estate sector should see hope in this analysis.

But there is no sector safe from the supply chain crisis or prices rising again on raw materials. Reuters reports that many materials like windows and breaker boxes are in short supplies while the cost of building materials have surged, like copper which is up 16%, and lumber prices are jumping back up to record highs set in May.

Homebuilder confidence is up, according to the National Association of Home Builders (NAHB), but their most recent survey also indicates that “builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times.”

The Mortgage Bankers Association (MBA) reported today that mortgage applications for new home purchases are down 16.2% compared to September 2020, and applications are down 4% compared to August. It is notable that the average loan size hit $408,522, the highest on record, and another indicator of increasing construction costs.

Going forward, analysts expect the backlog of starts to continue as labor and supply chain issues persist. And although the news isn’t overtly positive, single family housing on its own is actually performing better than in 2020. There is light at the end of the tunnel for hopeful homebuyers.

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