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Kathryn Carlson's Blog

By Kathryn Carlson | Broker in 80209

Housing Market Bottoming Out? Renting Market Accelerating

by Phoebe Chongchua

Are we really poised for a recovery in the housing market? The latest encouraging words from the U.S. Conference Board's Demand Institute Division are that we are heading for a rapidly accelerating rental market which will lead to a housing recovery.

While the American dream of homeownership is still an unending quest, the size of home that people are buying will be smaller and many will rent for a good while before they can afford that dream home.

According to the report, there are indications from industry data that the market is "bottoming out" but the great shift in real estate is the push toward the rental market which is helping fuel the recovery.

The Shifting Nature of U.S. Housing Demand report says that those who lost homes to foreclosure, those who don't have a downpayment saved, and immigrants are propelling the rental market to soar.

But according to the report, it will be a "two-stage recovery". The report stated, "Seasonally adjusted, average house prices will increase by up to 1 percent in the second half of 2012, rising to an annual rate of increase of 2.5 percent by 2014." It continues, in the following three years (2015-2017) there will be a "rise by 3 to 3.5 percent a year on average".

The second stage is the rental market acceleration. The report indicates the demand will be from those who want to purchase rental properties to capitalize on the accelerating rental market. It states that, "More than 50 percent of those planning to move in the next two years say they intend to rent".

With that news comes, of course, the multi-unit properties. This is a big area for developers and the data, this year, already shows it's a growing market. "The only segment of the home building sector now showing clear signs of recovery is multifamily housing," according to the report.

The big draw for many of these rental properties is close proximity to shops, retail, restaurants, work, schools, and mass transportation. This is because some renters prefer to own fewer cars and therefore like the idea of being able to get around via walking and mass transit. It saves on the monthly car and parking expenses.

Developers are taking note of this and many are attempting to build work, play, live developments, even in suburban communities. However, these projects aren't all being met with welcome arms. Some residents are fighting these types of planned developments claiming there will be too much traffic congestion, not enough parking and too much high density for the area.

But the indications are clear that those who are renting and, even homeowners, are desiring to spend less time in traffic, and more time in community-oriented spaces that are easy to get to and conveniently located near their residences. Much of this is driven by the rising cost of gasoline and long delays in traffic.

So while bottoming out may be on the horizon, the report points out that the recovery is not likely to be "uniform". Some areas may see increases in prices from 3 percent plus, a year on average from 2015 to 2017 and other regions as much as 5 percent plus by the year 2015. However, the report states that "prices could remain flat or even continue to fall over the next three years" elsewhere.

It seems it will all come back to the age-old adages: location, location, location and time will tell.

Published: May 18, 2012

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