Unemployment jumped to 7.2% in Saint Louis this month, up from 5.6% just one year ago. We all know that job creation and growth lead to household formation and thus apartment rentals and home purchases. Historically just 10% of the formed households lease apartment homes.
I say all that to suggest that some of the key fundamentals of our business are turning the wrong way. At least that is my view.
Let me know what you think.
Your trying to remain optimistic apartment maniac,
M
0 Responses
I think it depends on the level of people buying homes as a factor too. People need somewhere to live. I feel that while unemployment is not a good thing, the fact that fewer people are able to afford to go and buy a home (or their first home) will help to maintain occupancies in these difficult times.
My observation here in the Detroit area is that the lack of options for first time homebuyers has counter-balanced job losses, and from my perspective actually increased rental demand. I continue to have multiple well qualified rental prospects every time I have a single family rental available.
In addition, I’m closing on my first multi-family building in about 10 days and I have begun marketing to fill the couple of vacancies, and in this case as well I have seen very strong demand for the units.
Mark and Dennis,
Thank you for the quick reply in commenting. I wonder if our future economic climate will give cause for people to double up, triplet up and or remain at home another year before venturing out to rent. And or, in your case Dennis, they rent single family in lieu of multifamily because they are used to that style of life.
Nevertheless I am keeping a tight eye on how many people attempt to break leases as a result of job loss.
Thank you again for taking the time to comment.
M
Mike-
We’ve already begun to see some issues with delinquency at our communities, and while the number of skips isn’t out of control it is unusual. I think you will see people doubling u and the demand for the 1 bedroom not as strong as it is right now. I also agree that we may not see the young “just out of school” crowd as soon, as they may choose to live with Mom and Dad for a year or so before venturing out on their own.
These are challenges ahead, but I also believe we won’t lose as many to home ownership, and as we have seen this year our turnover ratios have improved by 10-15% already!
Apartment fundamentals have never been better and are solid. Occupancy should be rising, NOT declining; there are more renters than before, and less new product coming into the market with the exception of the great state of TX. Rising unemployment is a challenging factor, however, even at 7%-8%, 92% of the population have jobs. Operating in MI, where we have the 2nd highest unemployment rate in the country, most of our prospects are moving to MI from out of state for job opportunities. Do something Remarkable that give reason for the available rental prospects to choose you over the guy across the street. Break From Apartment Commodity, and occupancy and NOI will remain high
The rental market in California is still very strong. So many home owners are foreclosing which forces otherwise solid individuals back into the rental market. Granted, many opt to rent homes or the larger 2 to 3 bedroom apartments. Regardless of the market Southern California will always be in a housing shortage. Residential investment properties will continue to be a strong play as long as the property throws off enough cash and you can obtain the financing. Keeping them rented should not be an issue.
The rental market in California is still very strong. So many home owners are foreclosing which forces otherwise solid individuals back into the rental market. Granted, many opt to rent homes or the larger 2 to 3 bedroom apartments. Regardless of the market Southern California will always be in a housing shortage. Residential investment properties will continue to be a strong play as long as the property throws off enough cash and you can obtain the financing. Keeping them rented should not be an issue.