Dec 10, 2018 Walt Wojciechowski
With home prices at historic highs and inventory at record lows, it's not exactly the best of periods for deal-hunting prospective homebuyers to be in the market. The inauspicious time for purchasing properties has led to an uptick in demand for fully furnished rental apartments. This could be a boon for penny-pinching tenants, opportunity-seeking landlords and business owners using alternative credit data to potentially grow their customer base.
Revenues for the serviced apartments market reached $3.62 billion in 2017, according to data compiled by the Highland Group and reported by The Wall Street Journal. Corporate housing is an umbrella term used to refer to apartments leased for 30 days or more. It's the fifth straight year in which the sector has experienced growth.
4 months worth of single-family home supply
The inordinately limited number of single-family houses up for sale, in comparison to apartments, has fueled that volume. Indeed, based on the most recent statistics from the National Association of Realtors, the supply of existing homes in May was 4.1 months at the current sales pace. This means that if no other properties entered listings, inventory for condominiums, co-ops, single-family homes and townhouses would dry up completely in approximately 17 weeks. Existing-home listings have fallen on a year-over-year basis for 36 months straight.
"Apartment availability has improved compared to homes."
Meanwhile, apartment availability has largely moved in the opposite direction, rising 6.5 percent in 2017, the Journal reported from the Highland Group's findings.
Mary Ann Passi, chief executive of Corporate Housing Providers, told the newspaper that serviced apartments have helped to redefine convenience, removing some of the traditional tasks tenants arrange on their own, like furniture and cable installation, handled instead by the companies who rent them out and then sublease.
"We are not only seeing millennials and a younger generation who don't want to own a home somewhere," Passi explained. "Empty-nesters are doing the same thing.
Most Americans think it's less expensive to rent than buy
Americans increasingly turning to renting maintains a trend that's developed in recent years, as asking prices show no signs of slowing, up on a year over year basis for 75 months in a row, based on estimates from the NAR. Last summer, more than three-quarters of renters said they viewed renting as more affordable than buying, the Journal reported. That's a near 10 percentage point climb from a similar poll done by Freddie Mac in 2016.
David Brickman, executive vice president and head of Freddie Mac's multifamily division, told the newspaper that, in actuality, the cost of renting as well as buying are climbing, but rents to a lesser extent.
"Rents are rising, but at a slower pace than home prices."
Figures from property listings website Zillow seem to suggest as much. Of the U.S.' 35 largest metropolitan statistical areas, rents are up in 27 of them through the month of May. Rents rose by around 2 to 3 percent over the previous 11 months, on average, with the median costing tenants around $1,440 per month. That's a 2 percent increase in year-to-date estimates. Average national home values are up more than 8 percent over the same period and by double digits in cities like Las Vegas and Seattle.
Aaron Terrazas, senior economist at Zillow, said the growth in apartment availability has helped to rein in rent increases.
"The slowdown in rent growth was most prominent in the markets that moved most quickly to add units - either because it was easy to build or because of local demands," Terrazas explained. "But the ever-swinging pendulum is again on the move. This spring rent appreciation has perked back up nationwide, though it remains well within a long-term sustainable range."
This is good news not only for renters, but also for business owners considering broadening their base of customers through the use of alternative credit data. Rent is one of several forms of payment information lenders use to assess customers' financial capabilities. The more data that's available, the more accuracy with which business owners can base their credit decisions.
For more specifics about alternative credit reporting, you can speak with a Microbilt business solution consultant by phone, email or online chat.