No question that the mortgage meltdown and real estate debacle of the last 5 years, have had consequences in all of us, one way or another, that never were possible in our minds as Americans. The concept of homeownership, part of the American Dream, it is not present in the minds of new generations as it used to be. Availability of capital to purchase a home and Creditworthiness of Buyers is at the lowest level in history. Even with interest rates at historical low levels, and maybe dropping more in the short term, and lower home prices, it is not easy to afford a home these days. The Census Bureau shows 17.5% increase in rentals between 2005 and 2010, but many areas have seen much higher increases. Chicago 40%, Phoenix 70%, san Antonio 48%, Dallas 38% Austin 40%, Las Vegas 67%, Orlando and Denver 22% and Orange County California 37%. Apartment vacancies dropped from 8% in 2009 to 5.6% in 2011 as a national average, pushing national rent prices up 2.5% nationally.
We will see more investors come into the single family rental business and we predict that millions of dollars will come from institutional investors and REITs into the single family rental market.
We do not think Congress will get rid of the mortgage interest deduction for primary residences but if they do rents will skyrocket, renting will become more much attractive that owning, even for those that can afford to purchase a home.
Some may point out that unless we allow rent paid for a primary residence to be a tax deductible item, something common in other countries, we are putting extra weight on those forced to rent, but we do not think this will have any life in Congress, based on the current deficit and fiscal cliff. Such a measure will also push rents up.
Our personal opinion is that either home buying is fueled by homeownership or rental investment acquisitions, the need for shelter will continue to push real estate development of new homes and purchases of existing homes, having a healthy real estate market at the end, one way or another. Population growth and employemnt rate are crucial for the health of the real estate market.
