Month: February 2020

4 Tips for Leasing Small Rental Properties in the Winter

Spaces Real Estate founder Bentley Phillips on how to fill units or recoup losses.

For an investment-grade property manager, a few empty units are usually within an acceptable risk threshold. But smaller mom and pop owners could lose a large share of their income on a single vacancy—especially over the winter.

Over the past few years, Bentley Phillips has noticed his Chicago-based clients’ lease-ups slowing considerably during the winter months. “There’s only so many qualified renters left in the marketplace at the end of the season,” says Phillips, founder of Spaces Real Estate, a multifamily brokerage focused on small-scale local property owners. “The recurring theme over the past few years is that there are considerably more properties than there are qualified renters out there.”

To either avoid or manage the possibility of a vacant unit in the off-season, Phillips offers the following tips to property owners or managers with 40 or fewer units:

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    The U.S. Warehouse Sector Won’t Be Able to Escape the Impact from Coronavirus Outbreak

    Phoenix reports highest year-over-year gains in December

    U.S. home prices increased 3.8% in December from a year earlier, a faster pace than the prior month’s 3.5%, according to S&P CoreLogic Case-Shiller National Home Price Index.

    Measuring the nation’s largest urban areas, the 20-City composite index rose 2.9% in December from a year ago, faster than November’s 2.5% pace, according to the report issued on Tuesday.

    Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said the housing market continued its trend of stable growth in December.

    “At the national level, home prices are 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak,” Lazzara said.

    According to the index, Phoenix; Charlotte, North Carolina; and Tampa reported the highest year-over-year gains among all of the 20 cities.

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      U.S. home prices rise 3.8% in December

      Phoenix reports highest year-over-year gains in December

      U.S. home prices increased 3.8% in December from a year earlier, a faster pace than the prior month’s 3.5%, according to S&P CoreLogic Case-Shiller National Home Price Index.

      Measuring the nation’s largest urban areas, the 20-City composite index rose 2.9% in December from a year ago, faster than November’s 2.5% pace, according to the report issued on Tuesday.

      Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said the housing market continued its trend of stable growth in December.

      “At the national level, home prices are 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak,” Lazzara said.

      According to the index, Phoenix; Charlotte, North Carolina; and Tampa reported the highest year-over-year gains among all of the 20 cities.

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        Only 3 major metros saw new construction increases in 2019

        However, remodel activity is increasing in most large cities

        While February’s Housing Market Index revealed a small dip in homebuilder confidence, the overall takeaway is that sentiment levels are still high.

        In fact, according to the National Association of Home Builders and Wells Fargo, the last three monthly readings mark the highest sentiment levels since December 2017.

        The latest Housing Health Report from BuildFax reflects that. The housing data and analytics company released its latest report on Tuesday and stated that year-over-year increases in single-family housing authorizations exceeded 6% from December 2019 to January 2020. The trailing three-month outlook grew 6.8%, according to the report.

        “Housing activity has started on strong footing this year, which should be welcome news for the broader economy. The housing market, which accounts for a substantial portion of U.S. GDP, has the potential to drive increased growth, providing a balance to any concerns of a sluggish market heading into 2020,” BuildFax Managing Director Jonathan Kanarek said. “While we’re still experiencing some growing pains regarding the recent housing shortage, as more inventory becomes available, we might see the housing market growing at an even faster pace.”

        That said, there are certainly areas of the U.S. that are still sluggish in terms of new housing construction. According to the report, only three major metros saw increases.

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          The Cities American Renters Are Migrating To and From in 2020

          Apartment List’s Renter Migration Report for Q1 2020 says Denver is trending, while Detroit is sliding.

          Many species of animals, including birds, fish, and whales, migrate to new locations at various times of the year. While their reasons for moving are likely instinctual and can be credited to temperature, food availability, or mating, humans also migrate in patterns, but likely due to employment, family, or the local housing market.

          Every quarter, Apartment List releases a Rentonomics report that provides an in-depth analysis on the migration patterns of America’s renters. Researchers use data—based on recent searches of Apartment List users—to look for which parts of the country are retaining their renter populations, which parts are attracting today’s renters, and which metros renters are fleeing from. Read on to find out which U.S. cities are faring well in the new decade, and which are floundering.

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            There haven’t been this few homes on the market since 2013

            Supply crunch spurs January’s home price uptick, bidding wars

            In the first month of the year, the nation’s home-sale prices increased by 6.7% from 2019 levels, coming in at a median of $306,400, according to Redfin.

            Of the 85 largest housing markets Redfin tracks, only three saw a year-over-year decline in the median sale price in January, including San Jose, California; Baton Rouge, Lousiana; and Greenville, South Carolina, which dropped 4.3%, 4.1%, and 1.4%, respectively.

            During the month, home sales increased by 6.7% year over year, marking the sixth consecutive month of increases.

            Despite this gain, sales were still down 1.1% from December on a seasonally adjusted basis and homes spent two fewer days on the market than they did in 2018.

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              Opportunity Zone Projects Seem to Be Finally Breaking Ground

              After a new round on Treasury guidelines on Opportunity Zones, developers seem to be more confident in the program.

              In April 2020, workers will start construction on Scottsdale Entrada in Scottsdale, Ariz. The massive development will eventually become the “largest mixed-use asset” in the city, including 735 new apartments, according to its developers.

              Scottsdale Entrada is just one of the investments now underway that will claim tax benefits through the federal Opportunity Zone program. Developer Banyan Residential paid Sunchase Holdings $38 million from an approved Opportunity Zone fund for the 30-acre site, located on a former auto mall in an Opportunity Zone, according to data firm Yardi Matrix.

              After many months of delays and missed opportunities, developments like Scottsdale Entrada are now underway across the country. “We anticipate new ‘Opportunity Zone’ projects will begin to break ground more frequently,” says Doug Ressler, director of business intelligence with Yardi Matrix.

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                Record number of renters believe renting is more affordable than owning

                42% of renters pay more than a third of their household income on rent

                A recent report from CoreLogic showed that home prices increased 4% year over year in December, and projected the U.S. price index will rise by 5.2% by December 2020.

                As home prices continue to rise nationally, it’s little wonder that Freddie Mac’s latest “Profile of Today’s Renter and Owner” found that the majority of current renters believe renting is more affordable than owning.

                However, the percentage of renters who hold that belief has increased dramatically in the past year.

                A whopping 84% of renters said they believe renting is more affordable than owning – an all-time high for the survey. For comparison, this number is up 17 percentage points from February 2018.

                The survey also found that affordability issues affect the average renter more than a homeowner. Freddie Mac said there are 42% of renters who paid more than a third of their household income on rent.

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                  Retail Investors Fuel a Surge in Non-Traded REIT Fundraising

                  Most recent fundraising has gravitated to non-traded NAV REITs, which provide additional transparency and liquidity than traditional non-traded REITs.

                  After weathering a rocky patch that sent many investors to the sidelines, non-traded REITs appear to be back on track with steady gains in capital flowing into the sector.

                  Non-traded REITs raised $11.8 billion in 2019, which is the highest fundraising total since 2014, according to industry data from Robert A. Stanger & Co. Inc. The firm is predicting another strong year of fundraising ahead with a further 27 percent jump to $15 billion for 2020.

                  Certainly, there are any number of unforeseen events that could derail that prediction, such as an increase in interest rates that would dampen investor appetite. But, for now, the industry appears to be on solid footing with a number of factors contributing to strong fundraising. Part of the credit is due to continued evolution within the sector that is resonating with its core base of retail investors.

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                    Labor shortages are hitting multifamily, too

                    A lack of construction workers has led to slowing unit delivery

                    Despite a prolonged multifamily growth schedule, there is still room for rent prices to go up, according to Yardi Matrix. A healthy job market means that economic growth will remain moderate, so rent gains should remain healthy in most metros.

                    Nationally, rent growth only dipped below the 2.5% long-term average early in the cycle. The report attributes the growing rent prices to a high occupancy rate and growing wages.

                    Construction workers needed

                    More than 1.5 million units have been delivered over the last five years, with an expectation of 300,000 units to be delivered in 2020.

                    Deliveries have slowed recently due to the labor shortage, slowing down housing and multifamily starts in 2019. However, Yardi Matrix says there is a growing supply of apartments in tech-heavy centers like Seattle, Denver, Raleigh and Nashville.

                    And across the nation, when new multifamily is built, it’s not staying empty long. Yardi Matrix says absorption remains robust in most markets, and the latest national occupancy rate of stabilized properties is near 95%. Rent growth is slowing in some markets as new supply gets digested.

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