In a recent article by Bloomberg, author Patrick Clark makes a case that “The American Dream increasingly involves a lease, not a mortgage.”
Clark notes that “Fifty-two of the 100 largest U.S. cities were majority-renter in 2015, according to U.S. Census Bureau data” and that “there are reasons to think the trend toward renting will continue. A 2015 report from the Urban Institute predicted that rentership would keep rising through 2030, thanks to demographic trends that include aging baby boomers who downsize into rentals.”
Clark also speaks to low inventory in the housing market – a trend that is certainly evident here in Grand Rapids – “In the shorter term, housing market dynamics will also play a role. Fewer than 1 million homes were on the market in the first quarter of 2017, the lowest number since Trulia began recording inventory data in 2012. The shortage makes it harder for renters to buy. Meanwhile, rental landlords, including large Wall Street players and mom-and-pop investors, continue to plow cash into single-family homes.”
As noted by Jim Harger on MLive back in January “The region’s real estate market, ranked No. 4 in a recent survey of the nation’s hottest housing markets by Trulia.com, saw 13,593 single family homes exchange hands last year, a 3.7 percent increase over 2015.” Later that month Grand Rapids Business Journal, citing a study done by Realtor.com said “The shortage of homes for sale, combined with growing demand for homes has created a “skintight, depleted” market where first-time homebuyers are struggling the most”
I’ve referenced Patrick Clark on our blog before. Back in February I ran into Landlords Are Taking Over the U.S. Housing Market. I was particularly intrigued by the statement “Smaller investors see rental properties as an attractive way to save for retirement. To some extent, they’re focusing their resources on cheaper markets, because the profit margins are better at lower price points”. The article goes on to say “In Seattle, where the median home price was $414,000 at the end of last year, the annual share of sales to non-occupiers peaked in 2013, at 23 percent. But in cheaper Dallas, where the median home price was $201,000, the share of homes sold to people who don’t live in them nearly doubled over the last 12 years.” Reading this I couldn’t help but think of our home town of Grand Rapids, Michigan. As a West Michigander I laughed out loud at the phrase “cheaper Dallas”. Compass Realty Service‘s broker Mark Troy was chatting with a group of investors from California who were shocked they could purchase rental property in Grand Rapids that was cash flow positive. Circle back to 12 Reasons Why Rental Properties Are the Best Investment step 11 Multiple Ways to Profit – the California group is in WMi shopping because to buy in their home state they have to forgo 1/4th of the benefits of rental ownership – cash flow. All of this put together makes me realize how great we have it in Grand Rapids.