There are ‘accidental landlords’, as well as those who got there on purpose!” Renting is the New Black - Kansas City Real Estate

“Nancy,  there are ‘accidental landlords’, as well as those who got there on purpose!”

Renting is the New Black

The current state of affairs in our Kansas City housing sector as a whole is not exactly awe inspiring.

Differing parts of our market are struggling, but for dozens of reasons, a hot market is emerging – apartments and rentals which is predictable in a time when unemployment is at an unhealthy rate, lending is tough not only for buyers but builders, and the shift towards renting is rising. This is good news for apartment locator's and Realtors that represent investors, but could slow residential agent paychecks for a while.

Unless you have the ability to help investors succeed.

Home prices drop, renting rises

Although a layperson would think dropping prices is beneficial to housing and would cause a buying frenzy, the opposite is true as sellers struggle to unload their houses, owners are losing value in their major investment, and a glut in inventory backlogs the market. Rentals are also heating up because of homeowners unable to sell becoming “accidental landlords.”

Housing is struggling as home sales continue to slow, having fallen 3.8% in May, according to the National Association of Realtors’ data just released that shows sales are down 15% from May 2010. Also favorable to a heated rental market is the difficulty buyers are finding with mortgage lending and confidence in ability to get a loan has declined steadily over the last three years.

Leasing is cool

We’ve been writing for some time about the stigma around renting disappearing. There is even a rising “Generation Rent” as the American Dream shifts away from the idea of mandatory home-ownership just as we shifted away from the idea of a mandatory nuclear family.

People of affluence are no longer afraid to rent or admit that they rent. Recently, I spoke at a women’s group and one of the other speakers had on Manolo Blahniks (from this season, mind you) and talked about her new little condo downtown she was renting and admitted that she had downsized and that two years ago she was lying about renting but now felt the shame was culturally fading.

The side effect that only the smartest of the smart will plan for is that many of these people that are choosing to rent could end up buying in the very areas they’ve been testing out while they rent in a down economy, opening a future pipeline for Realtors and a niche that could easily be dominated in major metro areas in another few years.

Rents are rising

Vacancy rates have been at 10% nationally for some time but are projected to perform even better in 2012, dropping to 5% which spells higher rents. We reported rent spikes across the nation with some 17% spikes in Austin and 30% spikes in Boston, now with other cities following suit. “In the last six years, 1.2 million American adults have moved back in with their parents. We expect to see that number rise as double digit rent increases set in. We anticipate local tenant councils will be very busy over the next few years as renters are caught off guard by such spikes. Property owners and multifamily managers will take advantage of this situation to improve cash flow as the housing crisis continues and renters who are scared of buying will have their fears reinforced as they rarely see the difference between the rental sector and the housing sector (they’re all scary now).”

Slow and Steady wins the race; No Gold Rush for investors

Vacancies will continue to drop, rents will continue to rise and banks will still keep lending so tight that this time around, new building will not be out of control, nor will it be the primary focus. Units that come online will be redeveloped units, upgraded units or simply houses that aren’t selling that become rentals. This shift toward favorable investments in rental units will all go down in a slow, steady manner as we don’t predict a gold rush.

This is simply a natural trend in the real estate cycle, but we don’t predict a major bubble.

Remember, all real estate is local

Our Kansas City metropolitan area is full of residential investment opportunity....Yet there are areas that make management and ownership more difficult, and may not fit all investor’s plans.

If you’re out to become a landlord, let’s work together and make certain the effort is purposeful, rather than accidental. Should we talk?


RE/MAX sells more homes than any other real estate company.
For a reason...should we talk?

Blog post written by the Dowell Taggart Team of RE/MAX Premier Realty

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