– by Marc Courtenay –
Believe it or not the housing industry is making a stellar comeback. After a collapse in residential construction during The Great Recession which began in 2008, new home construction is leading the housing recovery. The Commerce Department reported on March 19, 2013 that housing starts rose in February to a seasonally adjusted annual rate of 917,000. That’s up from 910,000 in the previous month, and it’s the second-fastest pace since June 2008. Construction on single-family homes rose to an annual rate of 618,000, the most in 4½ years.
At the same time the report announced building permits, a leading indicator of future construction, increased 4.6 percent to 946,000. That was also the most since June 2008. This brings the good news that housing starts have risen 28 percent higher over the past 12 months. The only bad news going forward is that the cost of building materials has risen significantly over the past year. Builders are also going up against stiff competition for land that has been permitted for development. Developers and independent construction firms are finding tough going when it comes to obtaining financing to buy land to build on and to cover new construction costs.
Those concerns have dampened homebuilder confidence the past two months, according to the National Association of Home Builders/Wells Fargo builder sentiment index. The ramifications of this were well-covered in an Associated Press report which was released on Monday March 18th. In spite of the drop in the sentiment index, the survey for this month showed that builders’ outlook for sales over the next six months rose to its highest level in more than six years. According to a CNBC videoreport the CEO of Meritage Homes, Steven Hilton says that “…the new-home market still has a long way to go before its back to normal.”
The question many Property Managers are asking is, “How do I capitalize on the boom in the housing market?” One way is to find out if the homebuilders in your area have worked out special mortgage arrangements with lenders to help them unload the homes they’ve recently completed. Then let your clients know about what’s going on. Either via email or for a personal touch in a letter, inform them concerning this recurrence of relaxed lending standards for owner-occupied new home purchases, if such is the case. If the builder and lender have incentives or restrictions for buyers who are not intending to occupy the house, disclose these as well.
Mortgage rates continue to be at all-time lows. This has helped the “Housing Affordability Index” to lower substantially over the past 4 years. The National Association of REALTORS®’ Housing Affordability Index is based on the relationship between median home price, median family income and average mortgage interest rate. Check the Affordability Index in your region of the country. If it is still less expensive to rent than to own, make that a salient point in your advertising and your discussion with prospective residents. Having the latest information and statistics on housing and affordability will give you a reputation as a source of relevant, timely insights for both your owner-clients and residents.
Use your imagination to build a list of all the advantages of being both a landlord and a renter during times like these. Albert Einstein said, “Imagination is more important than knowledge” and if we use our imaginations we’ll be able to create more opportunities and turn vacancies into occupancies.