By Marc Courtenay
Just when we thought housing prices may cool down, a new sign of a housing “bubble” has emerged. This combined with a June surge in U.S. home construction has property managers paying attention.
Other bubbles that directly relate to the property management business include rental rates, which moved 3% higher in June on a year-over-year basis. That reality is moving the consumer-price index higher as well. At the same time, anecdotal evidence is surfacing around the nation that the housing supply is tightening. This has contributed to “bidding wars” by potential buyers on the limited number of homes for sale.
On the central coast of California, a two-bedroom condo that sold for $185,000 at the end of April went back on the market July 16 at an asking price of $199,900. Two identical offers came the very next day. The sellers responded by asking each potential buyer to “… give us your best offer” so the seller could decide which one to take. Within 24 hours they accepted a counter-offer of $206,000!
First-time home buyers in areas like Seattle, WA, Denver, CO, and Charlotte, NC, are experiencing the same kinds of situations. This is especially true for lower priced housing where the demand is greater. If a buyer wants a fighting chance of having their offer accepted they must start with an offer above the asking price. That’s the sign of a market with a shortage of homes for sale.
Why the dearth of inventory? One reason is that millions of Americans aren’t selling their existing homes because they fear they can’t qualify for a new mortgage or afford the cost of selling. Other potential sellers, hearing about the inventory shortage, are fearful they won’t be able to afford one of the currently available houses for sale. The scant supply situation has many sellers “stuck.” According to a recent article in The Wall Street Journal “…in more than one-third of the 300 largest metropolitan areas tracked by Realtor.com, homes listed for sale in June had been on the market for a median of less than two months.”
That indicates a relatively quick turnover in home sales because the supply is exceeded by demand. Markets like San Francisco currently have a median of only 27 days for a house being on the market.
Relief Is on the Way
The Commerce Department reported that in the month of June housing starts rose nearly 10% from the month earlier to a seasonally adjusted rate of 1.17 million. How does that relate to the rental market? The large increase in housing starts was driven entirely by construction of multifamily housing units. These were mainly rental apartments that experienced a whopping 29.4% increase in new construction. More rental units are popping up in all major markets. This means more renters than buyers are shopping for a place to live, which spells big opportunities for managers to grow their businesses.
Because of bidding wars on the limited number of affordable homes for sale, property managers should experience more demand for rental units and shorter
From:: Property Management
