Landlords & Investors Win. Homeownership Tenure Up, Churn Down

by Tim Herriage

Landlords & Investors Win. Homeownership Tenure Up, Churn Down

by Tim Herriage

by Tim Herriage

A recent study from The National Association of Realtors found that homebuyers are staying in their homes twice as long as they were in 2006. home-tenure-1985-2006This may be great news for families, communities and landlords when it comes to mid-market steadily employed renters, but it’s a real downer for realtors in stable neighborhoods and markets and probably a negative for the American economy.
This is good for rental investors with existing rentals and bad for realtors and homebuyers who can no longer depend on inventory being created by move-up buyers. Homeowners are holding longer and maybe renovating to accommodate family expansion. This keeps desirable house inventory off the market, as these families are less likely to be in move-up or migration mode.
30 YEARS OF DATA
The NAR began these surveys in 1985 and “In 2006, we started asking first-time and repeat buyers how long they expected to remain in the home they just bought,” says a spokesperson for the NAR. “First-time buyers reported that their median expected tenure was just six years and nine years for repeat buyers, the lowest since we started collecting the data for both buyer types. For repeat buyers, that bumped up to 10 years in 2007, 12 years in 2009, and then up to 15 years in 2010 where it has remained steady for the past six years.
median-tenureFor first-time buyers, the median expected tenure in the home jumped to 10 years in 2008 where it has remained ever since. It is no surprise that repeat buyers expect to remain in their home longer than first-time buyers. It is interesting, however, to see that first-time buyers in 2006 expected to sell in just six years. Fast-forward a decade to 2015 and first-time buyers expect to sell in almost double the amount of time.”
PROPERTY LADDER OR CROWDED STEP STOOL?
The answer is first regulation has made the buying and borrowing process more harrowing for the everyday family. This has lowered housing expectations for many aspiring to climb the property ladder to a larger home. Families have also learned the disruption of a home sale, purchase and move to family lifestyle, schools, employment and community connection may not be worth it if the home structure can be expanded to meet growing needs, while not reaping them outsized sale profits.
The majority of renters still hold on to the American dream but with the current obstacles of tight household budgets, mortgage regulation, savings hurdles and stagnant wage growth as a result of a less than 2% GDP economic environment, their view of the property ladder looks like a step stool.
HOUSING IS AN ECONOMIC LOCOMOTIVE
Building new houses depends on commercial and construction loans. Existing sales depend on accessible mortgage credit.  Lending is currently shackled by banking rules resulting from boom-bust mentality of post Glass-Steagall deregulation which took down the wall between banking and brokerage. This moved banks from traditional depository and trust activity to a new bank model as a brokerage using loan origination, lending and asset spreads to become securities traders. It took less than a decade from Clinton 1999 to Bush 2008 for this legislated financial conflict to bite back. The core reasons for regulation may have been logical by the restrictive implementation has had negative effects on the economy, especially for the mid-market and affordable housing segments.
Americans have seen what happened and for the first time in living memory have become hesitant about housing. Now the notion of selling a house, moving up and taking a larger loan, betting that incomes would improve to meet future mortgage and credit obligations has been tempered. The “new normal” is the result.
INVESTORS WIN
Investing should always be about making the best of any situation and this has never been more true.  Patient cash flow investors are at a major advantage because the midmarket housing (80% of America) never loses its utility and value as a rental, simply by maintaining cash flow, taking advantage of buy-to-rent leverage and cautiously adding sound income rental properties when they come available. You may want to climb the property ladder and expand your portfolios. Take breathe and relax, time and demographics are on the side of the patient investor.
If you are looking for mid-market properties or a way to participate in this market directly or indirectly, 2020 REI Group can help. Go here…

2 Comments

  1. The housing prices went up quiet a bit in the last year, and as an investor I am scared to buy any more, I usually buy and rent,
    My feeling the market is going down sooner than later .and now is not the best time to buy .

  2. On a macro level we do not agree with this position as the U.S is acutely short of housing inventory especially in high demand cities, short of some major economic shock. More supply is location specific and yes sudden additions to for sale inventory will at most flatten appreciation. Adding new housing supply is not simple, again with the caveat that demand (local) remains steady. See latest blog on Housing Shortages – http://www.2020rei.com/investor-alert-america-faces-an-acute-housing-shortage/ AJW

Leave a Reply

Top