Property Management – West Hills – Renters
It’s Tough To Afford To Be A Renter These Days
Housing affordability isn’t looking too promising as 2014 begins. If you listen to the National Association of Realtors the opportunity to be a homeowner hasn’t been this affordable in a long time.
If you review Figure 2 below you’ll get the impression that American housing is now extremely affordable and the typical household can easily make the monthly mortgage payment on a home. Thanks to historically low interest-rates, fixed rate mortgages have become more affordable for some American families and many analysts expect that this cheap credit will fuel another housing boom.
Figure 2: US Housing Is Affordable
Perhaps another home-buying- boom has begun, but from the index above it still looks like the price of housing is above the levels we saw between 2005 through 2008. Yes, there’s been a dip since 212, but anecdotally I’m not hearing of a big increase in existing housing sales since mortgage rates are climbing.
In fact on Dec.19, 2013 Reuters reported that “U.S. home resales fell sharply in November to their lowest level in nearly a year, hurt by a rise in interest rates since the spring and ongoing price increases that have shut some home buyers out of the market. The National Association of Realtors (NAR) said on Thursday [the 19th] that sales of previously owned homes dropped 4.3 percent last month, the third monthly fall in a row, to an annual rate of 4.90 million units.” That was the lowest annual rate since December 2012, and well below the median forecast in a Reuters poll of a 5.03 million unit pace. “It is a clear loss in momentum for home sales,” NAR economist Lawrence Yun told reporters.
How About The Cost Of Being A Renter?
As Mr. Doubtfire said to Mrs. Doubtfire in the movie by the same name, “Brace yourself Effie!” An online trade journal for folks in the mortgage industry, The National Mortgage Professional had a grim assessment titled, “American Renters Facing Tough Affordability Issues”.
“Affordability problems for renters have skyrocketed over the past decade both in number and the share of renters facing them, according to a new report on rental housing from the Harvard Joint Center for Housing Studies.” “The inability of so many to find housing they can afford dramatically impacts the health and well-being of U.S. renters, as lower-income households cut back on food, healthcare, and savings, just to keep up.”
The Harvard report, “America’s Rental Housing: Evolving Markets and Needs,” found that half of U.S. renters pay more than 30 percent or more of their income on rent, up an enormous 12 percent from a decade earlier. A large amount of the increase was found among renters with severe financial burdens (e.g. paying more than half their income on rent). These levels were unimaginable just a decade ago, when the percentage of American renters paying half their income or higher on housing stood at 19 percent and was already an alarming concern.
“Escalating rental affordability problems come at a time when the share of Americans that rent has increased from 31 percent in 2004 to 35 percent in 2012. In fact, the 2000s marked the strongest numerical growth in renter households in the last fifty years” the report continued. “As ownership rates fell, housing markets have adjusted dynamically to the increased demand for single-family rentals, with about three million existing homes switching from owner to rental occupancy from 2007-2011 alone.”
That number has risen in the last two years, and most of those houses were rented at local fair-market rent levels. So Property Managers, are you keeping up with the rental affordability circumstances in your area? How fast are your vacancies being filled, and will vacancies start a trend in the other direction?
Be prepared to speak with your owners (clients) and let them know what’s going on both regionally and nationally. If fewer Americans can afford the current cost of renting a house or an apartment, perhaps we will all experience the need for temporary rent reductions? Another possibility to consider; Are your owners and you willing to rent to multiple couples, and are you going to need to advertise your unfilled vacancies for singles to share to help the affordability challenge?
Hopefully a rebound in employment and a robust gain in the economic circumstances of the average American will unfold in the year ahead. In case it doesn’t, prudent Property Managers need a back-up, contingency plan. What is yours, and are you communicating with your clients about it? If you don’t have one, create one. Then plan on scheduling individual meetings with owners or do a client-appreciation seminar to let them know your ideas.
Carnahan Property Management services Woodland Hills,West Hills, Calabasas, Canoga Park, Tarzana, Reseda, Topanga, Encino, Northridge, Van Nuys,North Hills,Chatsworth, Sherman Oaks, Studio City, North Hollywood, West Hollywood, San Fernando Valley, Granada Hills, Mission Hills, Simi Valley, WestLake Village, Agoura,Toluca Lake, Valley Village, Burbank. Call us at (818) 884-1500 and check if we can service your area.
