 What It Is: There has been a steady decline in US homeownership since 2006, with a projected bottom occurring in 2018. The rate of homeownership has been hit from two fronts. On the supply-side, many builders simply did not survive the housing downturn and their absence is noticeable…nationally there are 50% fewer houses under construction than in 2006, with most construction happening in expensive Class-A urban locations. On the
demand-side, many of the incentive programs that previously made homeownership widely affordable have been removed or reduced. Incentive programs such as subsidized veteran home loans, subsidized transit, and government-sponsored mortgage programs have been restricted, and lending rules and regulations have been severely tightened. Millennials have been increasingly delaying the step of settling and purchasing a home. And over the last two years, baby boomers have begun to sell their homes and move into rentals themselves, relying on the proceeds of their home equity in order to fund their retirement.Why It’s Important: National homeownership decline, driven by millennials’ choice to rent longer, baby-boomers shifting to renting, reduced perceived homeownership affordability, and the slow rebound of new home construction all leads to high investor confidence in single-family rentals. This is especially true in a markets such as Portland that are seeing a huge increase in population. Matt Vance of CBRE says, “They have not left single-family living, they have left homeownership. We just have not seen the tremendous influx into the multifamily sphere.” So while investors do see this trend eventually also benefiting multi-family, the largest effects of a decrease in homeownership are still being seen in the single-family rental market, where vacancies are at a historic low. Furthermore, institutional investors still only represent 2.6% of all home purchases in Q1 2016, meaning that large funds still haven’t figured out a good way to invest in single-family homes in bulk. This leaves the single-family investing market open to individual investors who do not have to compete against large institutions. |
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 What It Is: Concerning homeownership, Price Waterhouse Cooper’s studies have shown that Millennials are delaying purchasing a home until they have kids and wish to send their kids to school. And when Millennials do buy (at increasingly older ages, 28-36), it is largely in the more affordable suburbs. Home improvement giant Home Depot pays close attention to Millennial buyers’ preferences. Here are a few of their findings: Millennials focus most on having “smart, energy-efficient homes with an inspiring outdoor space” and on transforming homes to be a reflection of their personality and self-expression. The rise of creative and inspirational home-centric videos and photos on YouTube and Pinterest has caused a taste-shift towards “light, airy and open as opposed to small rooms”, causing millennial home buyers to be more likely to remodel and engage in do-it-yourself projects to achieve these ends. The remodeling trend is also increasingly required as the average home is becoming older…with median home age shifting from 31 years to 37 years over the last ten years.
Why It Is Important: As real-estate investors, we should take advantage of this longer and longer delay in Millennials decision to purchase a home. While it would be unwise to have tenants making their own remodeling and DIY improvements in our homes (yikes!), we can learn from this remodel trend and tweak our offerings to embrace it. This may include making capital improvements to create fun back yard spaces, adding color, light, and windows, putting more focus on energy-efficiency, and for new investments, purchasing properties with more open layouts. In the coming months, Grid is going to be rolling out some simple improvements to our start-up and turnover work processes to help our owner clients increase the energy efficiency of their investment properties to better reflect the taste- and energy-preferences of the average Portland renter. |
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 What It Is: Though the number of overall home sales decreased, median sale prices in Portland have increased 11.4% over the last 12 months, to $391,000. During the same period, there has been a 20% drop in sales. Pending sales are also down 5.5%. On average, homes are sitting on the market only 30 days, down from 45 days this time last year.
Why It’s Important: Traditionally, a market with six months’ supply of housing indicates that the market is well balanced between buyers and sellers. Currently, the Portland-area market has approximately 2 months supply. This is clearly still a strong seller’s market. Based on this strength, sale prices are continuing to increase, especially in supply-tight areas such as North Portland, Hillsboro/Forest Grove, Milwaukie, Gresham/Troutdale, and Lake Oswego/West Linn. What should an investor do…buy, sell, or hold? One thought on this: Grid often gets calls from homeowners looking to rent out their large, expensive luxury homes. Feedback from these owners is that they have a difficult time getting these homes to rent quickly and when they do rent, owners have an understandably hard time getting them to bring in enough rent to offset the actual monthly carrying costs of the home. The reason is simple…the pool of renters willing to pay rents in the high $2000s and $3000s is still fairly small. For investors, this is a prime time to liquidate larger homes and reinvest the capital in more price-accessible housing. Middle-market housing has a much wider tenant base (leading to shorter vacancy times), and can often offer much better leverage and cash-flow. Reinvestment options include single-family homes, small-multifamily, and for those selling very high-end homes, even larger apartment properties. |
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We are pledged to the letter and spirit of U.S. policy for the
achievement of equal housing opportunity throughout the Nation. See
Equal Housing Opportunity Statement
for more information.
