Home Builders and Home Building Surge
Several Indicators Point to a Surge in Homebuilding
Just when you thought housing was dead for good, residential construction mounted an impressive surge. Consider these indicators:
1) Nationwide housing starts in November hit a seasonally adjusted annual rate of 685,000 units, the highest level in 19 months, 24.3% ahead of the November 2010 figure (source: WSJ).
2) In less than eight weeks the stock prices of publicly traded home-builders such as Lennar and DR Horton have gained more than 60%.
3) The Architecture Billings Index, another indicator of future construction, also rose last month. The index stood at 52 in November, up from 49.4 in October. Readings above 50 indicate a rise in billings. The American Institute of Architects, which compiles the index, indicated that the gain is almost entirely due to billings related to residential construction.
Home Building Surge Fueled by Demand for Rentals
Much of November’s increase came from the construction of apartments, town houses and other multifamily developments, evidence that rising demand for rental housing has encouraged developers to begin building again. Starts of residential developments with two or more units saw a 25.3% increase, while starts of single-family homes, which make up about 65% of the housing market, rose 2.3%. A recent survey conducted on behalf of the National Multi Housing Council (NMHC) also appears to support the conclusion that much of the surge in home building is fueled demand for rentals;
67 percent of respondents noted considerable activity, either in the planning stage or actual new construction. In particular, 20 percent said developers are breaking grown on new projects at a rapid clip. Yet even with this increased activity, more than half (54 percent) think new development remains considerably below demand.
2012 Should be a Good Year for Landlords in Portland
Towards the end of 2011 the Portland area had the tightest rental market of any major city in the United States, according to the U.S. Census Bureau. Only 3 percent of apartments here are vacant at any given time—half as many as were available three years ago. Rents have risen 17 percent in the last five years in the Portland metro area, according to the Metro Multifamily Housing Association, a trade group of landlords and rental managers. That’s well above the national average of 12 percent during that same time. In 2011 alone, Portland rents jumped 8 percent – more than three times faster than the nationwide rate.
Will this trend extend into 2012 and beyond? Probably. As a result of the Urban Growth Boundary and a strong focus on condo development (as opposed to apartments), rental supply in Portland is still exceptionally low. According to Willamette Week (a local weekly) Portland is “Renter’s Hell“:
The days of apartment companies offering a month off or free parking are long gone. Apartment managers and landlords see people lined up outside rentals, many with applications and blank checks in hand. Desperate renters are finding places have been rented within minutes after being posted on Craigslist. Some renters have offered to pay above the advertised rent if it means they can land the place.
Sounds like all the right ingredients for a prosperous year of the Landlord!
