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Finding opportunity through recession: New home sales decline, but rentals increase

Dec 05, 2011 Todd Milner

Since the recession of 2008, residential real estate activity has plummeted, specifically new home sales. According to the U.S. Department of Housing and Urban Development, new house sales during 2009 totaled 375,000. During 2010, the new house sales dropped nearly 14 percent to 323,000. The declining trend is projected to continue as following the statistics of October 2011, the Bureau's seasonally adjusted annual sales rate for new homes was 307,000. It is apparent that some Americans are slowly trending to stray from home buying and instead preferring to rent, Bloomberg news reports. "We are riding this sea change in how housing is changing in the U.S.," Reggie Brown, chief executive officer of All Property Management, said in a statement to Bloomberg. "The only growth is rentals." In addition to a struggling economy, Americans are finding it difficult to find jobs with a more than 9 percent unemployment rate, according to the Bureau, and the stagnancy of wage growth also inhibits buyers from investing in new homes. David Blitzer, chairman of the S&P Indices index committee, explained to that the overall condition of the economy makes it difficult to entice consumers to make long-term financial agreements, which is exactly what's entailed when acquiring a home. "While home prices are down to roughly where they were in about 2002 or 2003 and mortgage rates are probably lower than any living person’s memory, the market conditions to buy a home should be really good," Blitzer said. "Prices are down, mortgage rates are down, yet, there’s not much activity going on. That suggests to me that people are very concerned, but they still have to live someplace.” Renting may be the appropriate route for both the property manager and the resident, and this should not be seen as a disadvantaged circumstance, rather a lucrative opportunity. With so many individuals looking for units to rent, investors and property managers could benefit from tailoring their efforts to apartment complexes. However, given the status of the economy and reality of the unemployment rate, background screening of tenants becomes an even more imperative practice, as the last thing a property manager needs is a non-paying, fiscally irresponsible, criminal or unreliable resident within their property.