Headlines – Week of November 4, 2012

November 18, 2012

Single-Family Rental Demand is Outstripping Supply

As reported in a Wall Street Journal article, according to a report by real-estate firm CoreLogic, demand for single-family rental housing is outstripping the available supply of homes.  Some housing markets that have been hit hardest by the foreclosure crisis have seen rental demand jump by more than 25% in the past year.

The article points to the fact that many families who have lost their homes to foreclosure or that can’t qualify for mortgages given tighter underwriting standards are now renting.

The magnitude of rental-demand gains are eye-opening as markets such as Port St. Lucie, Fla.; Riverside, Calif.; and Tucson, Ariz., have all seen rental demand jump by 25% over the past year .  22 of 30 markets tracked by CoreLogic have seen year-over-year leasing gains.

Slightly more than 50% all rental units in the U.S., or around 21 million units, are single-family homes. Around four in five of those unit owners are individual investors.

The CoreLogic reports shows that investor demand for rentals shows little signs of weakening.

Leasing activity was up 7% from one year ago in August and up 12% from the beginning of this year, even though the inventory of homes for rent is down by 11% from one year ago.

As a result of this increase, it would take just 2.6 months to rent the available stock of for-lease homes in August, down from 3.2 months of supply last year and over 5 months in 2007.

Single-family rents rose by 2% last year and have increased by 1% so far this year, after declining in 2009 and 2010.  CoreLogic expects rent growth to increase throughout 2013, though at a lower rate.

The largest rent increases were found in North Port, Fl; Cape Coral, Fl; and Honolulu, where rents increased by more than 6%.

 

Warren Buffett Makes a Huge Bet on the US Housing Market

Legendary investor Warren Buffett is buying up real-estate brokerages around the country and is betting on a housing turnaround.  Buffett is partnering with Brookfield Asset Management, a Canadian real-estate investor, to more than double the size of his brokerage business.

Berkshire’s HomeServices of America Inc. unit will be the majority owner of the venture to manage a U.S. residential real-estate affiliate network. The firms plan to offer a new franchise brand, Berkshire Hathaway Home Services, starting next year. Brookfield’s network has operated under the Prudential Real Estate and Real Living Real Estate brands.

Berkshire has also purchased a brick maker, won the loan portfolio of bankrupt mortgage lender Residential Capital LLC at auction and built its HomeServices unit by agreeing to acquire real-estate brokerages in states including Oregon and Connecticut.

4 Top Real Estate Markets for Foreign Buyers

A recent National Association of Realtors study estimated that foreigners and immigrants who’ve lived here less than two years spent $82.5 billion on U.S. homes in the 12 months ended March 31. That’s about 9% of the total paid for all U.S. housing purchases during the period.

The NAR study found that foreigners spent more on average — $400,000 per property vs. $252,000 for the overall market — and paid cash for homes 62% of the time instead of taking out mortgages.

Foreigners and recent immigrants are diving into U.S. real estate because buyers consider housing here a good investment and see America as a safe haven for assets.

Many also need a place here for business trips, vacations or retirement or expect their children to study at U.S. colleges and need housing.

Additionally, some foreigners buy property in conjunction with buying U.S. businesses. Under the EB-5 program anyone who invests $1 million in a U.S. company and creates 10 jobs can qualify for an “EB-5” visa and eventual citizenship. (The requirement drops to $500,000 if you invest in a depressed U.S. locale.)

NAR found that Mexicans accounted for 8% of all sales to foreigners and recent immigrants during the 12-month period studied.

Other top sources for foreign buyers included Canada (24% of all sales to non-U.S. nationals), China (11%), India (6%) and Britain (6%).

Buyers from different countries favor different parts of America.

For instance, the NAR found that lots of Germans have bought property in southwest Florida, while many Canadians gravitate toward Arizona.

 Canadian Home Buyers in Florida

In Florida, 2013 is shaping up to be the ‘Year of the Canadians’ according to many of the state’s real estate professionals and industry experts. On the tourism front, 3.6 million Canadians visited Florida in 2011, spending approximately $4 billion. The total number of Canadian tourists more than doubles Florida’s second-largest source of tourists: Brazil.

Once Canadians get a taste of Florida, they’re increasingly putting up more permanent roots. Canadian buyers represented 31 percent of Florida’s international real estate purchases in 2011, according to the National Association of Realtor’s August 2012 report, “Profile of International Home Buyers in Florida.”

The next four closest countries are: Brazil (9 percent); United Kingdom (5 percent); Venezuela (7 percent) and Argentina (5 percent).

Almost half of the Florida home purchases in 2011 by Canadians were condos or apartments (48 percent) and about 90 percent were cash deals.

Conservative by nature, more than half of the properties purchased by Canadians were priced below $199,999 (65.4 percent). Canada’s top three destinations for property include the Bradenton-Sarasota-Venice area on Florida’s west coast with 14.4 percent of all purchases in 2011. Fort Lauderdale was second with 12.9 percent and Naples-Marco Island was third at 11.9 percent. 

Posted by Scott R. Lodde

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