Whether you’re a homeowner or a renter in the US, you’re likely feeling the pinch of higher rent and property taxes this year. Since 2010, the median home price has jumped nearly 30% from $164,900 to $212,100, according to the Federal Reserve. Meanwhile, data from commercial property tracker Reis shows that the average monthly rent has grown 14% from $966 to $1,124.
Many chalk this up to a strengthening housing market, but given recent data showing a lopsided and nontraditional housing recovery, that story would only be partly right. And the results have been affecting builders, realtors, and landlords in the US housing market to fairly different degrees.
So the real question: Which housing market players are winning in today’s postrecession world and which are falling behind?
Real Estate Brokers (Especially in the Existing-Home Market)
Existing-home sales, which make up roughly 90% of the housing market, have officially reached precrash levels. Existing home sales in March (the latest data available) jumped more than 6% month over month to a seasonally adjusted rate of roughly 5.2 million. This is the largest monthly increase since 2010, to be sure, and even brings sales volumes back to 2007 levels.
But higher demand is just the start — existing homes are also in short supply. Realtors and economists say that homeowners have been holding onto their homes longer — an average of 10 years instead of the historical average of seven, according to a survey by realtor association NAR — because of economic uncertainty or lack of equity.
Indeed, with the data from NAR showing unsold existing-home inventory levels at a 4.6-month supply — staying stubbornly below the magic six-month supply experts suggest is a healthy balance between supply and demand — home prices will continue to enjoy a steady floor, thanks to the shortage.
Short supply coupled with high demand spells higher home prices — and commission income — for real estate brokers in the existing-home market. Look for top US brokers like Long & Foster, HomeServices of America, Realogy, Re/Max, ZipRealty, and others to benefit in the months (and possibly years) ahead.
Multifamily Housing Builders and Managers
Thanks to higher demand from chapped homebuyers after the last crash, along with changing demographics and consumer tastes, especially among the millennial generation, players in the multifamily housing market have enjoyed healthy business growth as more people have become renters.
Responding to elevated demand, builders added 238,000 apartment complexes nationwide in 2014 — the most in 14 years — with plans to add another 210,000 this year, according to Marcus & Millichap.
Even better — at least for multifamily developers and managers — the average rent for the completed apartments in 2014 was $1,721, or 46% higher than older units, as developers targeted renters willing to purchase units with gourmet kitchens and other higher-end amenities.
Look for top luxury and urban multifamily real estate developers and managers (i.e., landlords) such as LEDIC Management Group, AMLI Residential, Gables Residential Services, and Post Properties, among others, to enjoy much of the growth from this trend.
New Single-Family Homebuilders
As U.S. News recently pointed out, while new multifamily and multiunit housing starts reached 356,000 in 2014 (the highest they’ve been since 1989), new single-family home construction in 2014 (460,000) was less than half of the 1.12 million reached in 2006. The primary reason? Since the Great Recession, more jobs have been created in metro areas, rather than suburbs or rural areas.
While a strengthening economy coupled with a shortage of existing-home supply will no doubt spur some growth in the new single-family home market, don’t expect sales to rise above prerecession levels for new home builders such as D.R. Horton, KB Homes, Pultegroup, and Lennar any time soon.