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Housing starts are rising, despite cost to buyers

Some buyers still prefer new builds over bidding wars for existing homes

More than a quarter of single-family homes for sale during the first quarter were new-construction homes — nearly 26%, and March housing starts jumped nearly 20% month over month to the highest level since 2006, per the latest report from Redfin. 

Although housing starts are rising, lumber prices have skyrocketed in the past 12 months, causing the average price of a new single-family home to increase by $35,872, according to the National Association of Home Builders.

But if you can afford it, notes Redfin Agent Melanie Miller, building a new home is still the preferred route to take for many versus entering the shark-infested waters of the current housing market. Existing home sales were 9% higher than a year ago with just two months supply to choose from. A healthy housing market is considered roughly six months of supply.

“New construction has typically been a good option for buyers who don’t want to deal with bidding wars because builders don’t usually set deadlines for offers,” Miller said. “Buyers also like that they can often buy a new home for what it’s actually listed for rather than having to offer way over the asking price to win.”

However, the U.S. housing shortage has grown so severe that some newly built homes now have waitlists that are 90 buyers deep, said Ryan Aycock, Redfin’s Salt Lake City market manager.

“Some builders are even canceling contracts with buyers who refuse to accept price increases,” Aycock said,  

Low mortgage rates have kept buyers engaged, even with high home prices. Rates recently fell below 3%, and are nearly 30 basis points lower than they were a year ago.

“Only higher rates will result in more days on the market and thus larger inventory,” said Logan Mohtashami, HousingWire’s lead analyst. “We need these two things in order for buyers to have more choices and more reasonable price growth. Again, the question remains if rates will get high enough to have this effect on the market before more price damage is done. Right now home prices aren’t high enough to impact demand in a major way.”

The country has also experienced an exodus of movers from bigger metros into “secondary cities,” as work-from-home mandates during the COVID-19 pandemic allowed workers to live anywhere. Cities with cheaper homes — and larger lots — became popular, and the amount of new housing starts quickly rose in smaller cities like Pueblo, Colorado, and Elgin, Illinois. 

In Elgin, single-family permits climbed 68.3% — the biggest jump of all metros studied by Redfin. Elgin was followed by Tacoma, Washington (up 58.9%), Bridgeport, Connecticut (up 57.9%), Minneapolis (up 57.5%), and Albany, New York (up 57%).

The largest drop in housing starts was in Newark, where permits fell 22% from a year earlier in the first quarter. Next came Allentown, Pennsylvania (down 19.6%), Virginia Beach, Virginia (down 10.5%), San Diego (down 9.2%) and Camden, New Jersey (down 5.6%). When broken down by region, the West had the lowest share of newly built homes as a portion of total single-family homes for sale, at just 8.4%. It was followed by the Northeast (11.4%), the Midwest (15.4%) and the South (25.8%).

Redfin Chief Economist Taylor Marr said California metros are showing the least amount of new housing starts, in part because those cities tend to have less vacant land available and less space zoned for housing development. In Fresno, California, just 2.4% of single-family homes for sale in the first quarter were newly built — the smallest share of the 82 metros in Redfin’s analysis. Fresno was followed by Oakland (2.9%), Bakersfield (3.2%), and Riverside (3.4%).

But new builds are still an option for many throughout the country, Marr said. 

“Building homes has become more attractive and profitable during the pandemic due to record-low mortgage rates and red-hot homebuyer demand,” Marr said. “At the same time, many homeowners have opted to stay put and refinance or remodel their existing homes instead of selling them, allowing new-construction homes to take up a larger portion of the market.”

Origination https://www.housingwire.com/articles/housing-starts-are-rising-despite-cost-to-buyers/ : 

CategoriesNews

Beyond the Pandemic: How Rent Relief Plans Can Boost the Rental Economy

The COVID-19 pandemic has shown many people the importance of being ready for the worst. Landlords have been negotiating with struggling tenants to create rent relief plans. The federal government has placed moratoriums on evictions and foreclosures. The pandemic (and the legislative response) has left both owners and tenants wondering if their contracts are still binding.

While the COVID-19 vaccine is rolling out, you, as a landlord and real estate investor, are probably worried about maintaining your properties and paying your mortgage. Meanwhile, unemployment numbers are at record highs; your tenants are worried about their own financial futures and may be unable to pay rent.

It is important to know that complaints of nonpayment may be exaggerated—the National Multifamily Housing Council found that 93.5% of renters paid February 2021 rent in full.

In the months to come, some real estate sectors, including hospitality and apartment REITs, could experience strong demand. The outlook for other sectors is mixed.

How can you as a landlord balance your own financial needs with your tenants’ to give both of you a way through challenging circumstances?

How prepared is your business for when things head south?

Challenges property owners are facing

There are three significant problems that you are likely to experience as a landlord during a recession.

  • It becomes more difficult to collect rent.
  • Old tenants might want to vacate.
  • It is more difficult to find new tenants.

These problems will continue to dog landlords struggling to recover their footing after the pandemic.

As a landlord, the best way you can prepare for a market downturn is to have policies and processes ready to implement and clearly communicated to your tenants. This gives you a legal and financial grounding in the event of economic recession or downturns in specific markets. Additionally, your tenants will know their options ahead of time.

Types of rent relief plans

One of the possible processes is to have a rent modification arrangement on standby. You can also create plans to handle garbage, water, and any other bills when rent is no longer as reliable.

One of the common incidents you are most likely going to experience during a long recession is your tenants requesting rent relief. There are several strategies to approach this as a landlord.

These include:

  • Rent deferral. In a rent deferral, you can choose to defer a tenant’s rent until a later time. Based on your agreement with the tenant, the deferred rent can be paid in smaller installments or in a single bulk payment. Another approach to this is to create a cap on operating expenses over a set period.
  • Rent reduction. You can also choose to reduce a tenant’s rent for all or some part of the total amount of time they have left on their lease. This reduction can be on either the base rent or the operating expenses.
  • Loan conversion. This is converting the past due rent of a tenant into a repayable loan over a longer set period. Loan conversion is evidenced by a promissory note cross-defaulted with the tenant’s lease.
  • Rent abatement. This is another strategy used if the client is due on several past payments. In rent abatement, you can choose to simply forgive some or all of the delinquent rent.

Regardless of the approach, you choose in handling rent relief, it is important to look out for the tax implications. Apart from this, you should also perform due diligence. Check out recent and previous financial records of the tenant to ensure you do not leave out any loopholes in the process.

Why is rent relief important?

As much as possible, you should try to find a workable package. It is important to be understanding and retain good tenants using any of the strategies listed above.

Generally, tenants found defaulting are not considered for most relief considerations. However, the circumstances of the recession might not make this workable, as most tenants are already in or would soon be in default when requesting rent relief. Document everything, and clearly spell out all details of any arrangement you and your tenants make.

The effects of a recession can be severe for everyone. If tenants are no longer able to keep up with their rent, making your maintenance and mortgage payments can become difficult. This is why it is often advised to have a contingency plan to pay these bills. With the proper preparation, flexibility, and good tenant communication, you can come out of recession stronger as a landlord.

 

Origination: https://www.biggerpockets.com/blog/rent-relief-plans