Rental Housing Boosting Industry

Signs of growing interest by consumers in the housing market can be clearly seen in the multi family rental market, attached housing (small apartment buildings, Town homes etc)  construction has been on the rise because of pent up demand. Prior to 2007 everybody and anybody who could was looking to buy a home  due to low rates and easy qualifying terms. As a result residential home construction boomed and multi family rental construction wained.  However, since then things have drastically changed, as a result of the Great Recession owners lost their jobs, their savings, their homes and their confidence.  With U.S. unemployment at 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

 Homeownership in America has dropped from its peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter and has since edged up to 66.3 percent in the third quarter of this year. Consequently the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier. 

From Morgan Stanley "  In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 "The Year of the Landlord." "Rents are rising, vacancies are falling, household formations are growing and rental supply is limited," the Morgan Stanley report stated"

"We believe the demand for rental properties will continue to grow."  Groundbreaking for new housing jumped 9.3 percent in November to the highest level in 19 months, fueling optimism that the battered housing market was regaining its footing"

As it relates to the housing industry the Architecture Billings Index, a gauge of future construction, picked up last month, breaking above the 50 level to signal growth in billings. The stock of homebuilders, as measured by a Dow Jones index [.DJUSHB  242.86  ---  UNCH    ]has shot up more than 30 percent since early October.

"Residential construction is finally beginning to rise from its post-recession lows," said Joseph Lavorgna, chief U.S. economist for Deutsche Bank. 

So there definitely seems to be some light at the end of the home industry tunnel and its not the train. While it would be more beneficial to see single family home construction rising as well, the industry is such that when one segment (rentals) rises the other (ownership) will stall. Smarting from the past five years of the housing meltdown, it will take consumers a little more time to change their mind set about home ownership. They will need to feel comfortable enough to venture back into home ownership and this will not happen in mass until unemployment starts to fall consistently, drops below 8% as a result of consistent economic improvement.  There are very good signs that this is happening, but one or two months or quarters of positive economic news does not a recovery make. We will need at least three straight quarters of positive economic news before we can call it a trend but we are well on our way there. 

Look for the housing recovery to start in earnest first in those states that were hit the hardest, Florida is one of those, especially the area of South East Florida. From my readings, talks with others in the industry and driving around the local area there are definitely more and more signs of a housing recovery starting to take hold. One of the best signs to look for is site excavation for building of any kind, which we haven't seen in several years but are now seeing at least in South East Florida.