Archive for July, 2012
Housing conditions lead to growth of fees, rents
Recent years have been marked by rising residential rents, driven largely by increasing demand in markets across the country.
The pressure of limited rental housing supplies has had several effects, such as encouraging investors to convert a significant number of single-family homes into rentals. Landlords and rental managers have also found themselves with less need to offer incentives that were commonplace pre-recession, when homeownership was on the rise and rental demand was at historic lows.
Additionally, various fees associated with rentals are going up in many cases. Administrative fees, charges for allowing pets and similar costs have risen in recent years. Owners and operators who are thinking about raising or restructuring fees should take into account the limitations that laws and regulations define. State, local and federal lawmakers have been focused on the real estate industry recently, and fee levels or increases may be constrained.
As construction and conversion adds to the number of available rental properties, competition is likely to increase. Demand will reach equilibrium with supply at some point, which may lead to fee and rent decreases. In the meantime, owners and managers should ensure that their fees are all at acceptable levels and are disclosed properly.
CBRE: Vacancy rate slips in Q2 from year
The country’s rental vacancy rate declined during the second quarter by a considerable margin, according to a report from CBRE, indicating business is likely booming for rental property managers nationwide.
The rate dropped in 52 major rental markets compared to the year before, the report found. The most substantial annual dips in apartment vacancies occurred in major markets including Houston, Cincinnati and Salt Lake City.
In addition to a decrease in vacancies in the rental sector, the research firm indicated rates also fell in every other commercial real estate market, including retail and office properties.
“The commercial real estate recovery remained intact in the second quarter, despite growing worries about the global economy,” said CBRE managing director Jon Southard.
Through the rest of 2012, CBRE expects effective rent growth to continue to improve in markets across the U.S., as long as the economy makes strides toward a recovery.
Dips in apartment vacancies may end this summer if more consumers turn to the for-sale housing market and purchase residential properties. However, numerous rental sector fundamentals should remain strong through year’s end, experts assert.
Lawmakers reauthorize NFIP
Congress recently approved legislation to extend and reform the National Flood Insurance Program (NFIP) to ensure its continuity through 2017.
Packaged in a bill with provisions concerning transportation and student loans, the extension marks the end of a multi-year trend in which the NFIP was repeatedly extended shortly before expiring or retroactively extended after its expiration. The program lapsed twice, causing a great deal of uncertainty among insurance and real estate industry stakeholders, who urged that lawmakers not allow that to happen again.
Now, the program has been reformed as well as reauthorized, with changes meant to improve the mapping of flood risk zones, discourage construction there and ease efforts to relocate out of risk areas into homes that are more favorably placed. Second homes and certain other properties are no longer eligible for subsidies. Among other effects, these changes are also intended to secure the NFIP’s financial position so it stops accruing debt and can begin paying it down.
Investors and rental managers may wish to keep an eye on changes to the flood risk maps and other alterations. In the long-term, the program should be more stable, benefitting those who purchase coverage.
