Monday, August 31, 2015

More Builders Becoming Landlords to Improve Cash Flow

Over the last few years since the end of the housing boom and bust, the pendulum which used to favor single-family home starts has been swinging towards multi-family ones. Although the reasons for this are varied -- including increased demand in urban markets, tougher mortgage approval guidelines, and Millennials contending with weak wage growth and student loans -- the general idea was that this swing was cyclical, and that demand for the standard single-family home for purchase would eventually rebound.  The problem is that it hasn’t really worked out that way -- at least not in a way that mimics historical norms.

According to recent U.S. Census data, in 2014 just under 65 percent of new home starts were for the traditional single-family home, with the balance mostly comprised of multi-family projects with five or more units. And yet as recently as 2009, single-family starts stood at 80 percent versus just under 18 percent for larger multi-family developments, which means that the share of multi-family housing starts nearly doubled in just five years.

So if the share of new, single-family home starts is not returning to normal as originally planned, how are builders coping in this strange, new world? For some, such as Lennar and Toll Brothers, by joining it.

In March of this year, Lennar introduced an 80-unit pilot program of single-family homes for rent near the city of Reno, Nevada in the community of Sparks. Located in the 640-acre Pioneer Meadows master-planned community complete with biking and hiking trails, the Frontera community offers six plans ranging in size from 1210 to 2182 square feet of living space, two to four bedrooms and attached two-car garages. Other features include stainless steel appliances and granite countertops in the kitchen, full-size washers and dryers, walk-in closets for the master suite, wood-style window blinds and even regular lawn maintenance.

Currently starting from $1,574 to $2,049 per month (or $.93 to $1.30 per square foot) plus premiums ranging up to $150, these homes are intended to provide a middle ground for tenants who don’t want to rent an older single-family home or traditional apartment, yet are unwilling or unable to purchase a similar home. Yet such tenants will certainly pay a premium over traditional apartments, with similarly sized units at The Trails at Pioneer Meadows starting at $1,242 to $1,384 for 1250 to 1321 square feet, or $.98 to $1.08 per square foot.

Still, Lennar is fortunate in that it has a back-up plan for this pilot program: If they can’t rent them out, they can simply sell them the usual way. In addition, given the complexities managing a community of single-family versus multi-family homes, it’s hard to predict how important this business will be to the company’s bottom line, especially when it already has a pipeline of 20,000 apartments worth over $5.5 billion yet to be built.

Luxury home builder Toll Brothers has taken a different route, opting to focus more on providing multi-family “Apartment Living” and “Campus Living” branded rentals in the metro Boston to metro Washington, D.C. corridor. Including a mix of four-story suburban apartments, transit-oriented units as well as a 38-story high-rise building in Jersey City (with more towers planned), what these communities share in common is a heavy emphasis on resort-style amenities, community events and concierge services coupled with the discretionary build quality for which the company is famous. So far the company is managing 1,141 rental apartments and developing another 1,920 units, and is eying further expansion to Boston, Miami and San Francisco.

However, for those builders not yet ready to dip a toe into the rental market, there are other options. Starwood Waypoint, a REIT which as of the second quarter of 2015 owned over 17,500 single-family homes and reported a stabilized occupancy of nearly 97 percent, has reportedly worked with a dozen builders to help them offload their slowest-selling plans or the final few homes in a community.

Finally, other options include the rent-to-own programs offered by companies such as Home Partners of America. Although such homes rent and sell for a premium versus local comps, the plan is to allow tenants to try out a home before locking in a down payment, with the caveat being that the longer they wait to buy, the higher the price will be.

On the flip side, knowing what the price will be even five years in the future can help today’s tenants work towards becoming a buyer tomorrow.

Friday, August 28, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/28/15


Please click here to see the edition of BuilderBytes for 8/28/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Pending home sales dipped in June but still up 8.2 percent year-over-year
  • Initial unemployment claims rise by 4,000 in latest report
  • Second quarter GDP incrrease rose sharply to 2.3 percent in second estimate
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Thursday, August 27, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/25/15

Please click here to see the edition of BuilderBytes for 8/25/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • July new home sales up 5.4 percent from June and nearly 26 percent year-over-year
  • Case-Shiller 20-city index rose by annual rate of 4.5 percent in June
  • FHFA House Price Index rose by annual rate of 5.4 percent in 2Q 2015
  • Consumer confidence rebounds in August as labor market continues to improve
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Friday, August 21, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/21/15


Please click here to see the edition of BuilderBytes for 8/21/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Existing home sales rose to eight-year high in July even as inventory remained low
  • Initial unemployment claims rise by 4,000 in latest report
  • Mortgage applications rise by 3.6 percent in latest survey as rates dip slightly
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Thursday, August 20, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/20/15

Please click here to see the edition of BuilderBytes for 8/20/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • July building permits fell 16.3 percent from June but still up 7.5 percent year-over-year
  • July housing starts reached nearly eight-year high, up 10.1 percent year-over-year
  • CPI rose 0.1 percent in July, up by just 0.2 percent over previous 12 months
  • Federal Reserve meeting minutes shows conditions for rate hike improving
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Tuesday, August 18, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/18/15

Please click here to see the edition of BuilderBytes for 8/18/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Builder confidence rises to 61 in August for the highest reading since November 2005
  • Empire State Manufacturing Survey tumbles sharply in August but future outlook remains positive
  • Producer Price Index rose 0.2 percent in July but down 0.8 percent for previous 12-month period
  • Consumer sentiment dips in preliminary August reading
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Friday, August 14, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/14/15


Please click here to see the edition of BuilderBytes for 8/14/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Retail sales rose 0.6 percent in July, revised upwards for May and June
  • Initial unemployment claims rise by 5,000 in latest report, but 4-week average still lowest since April 2000
  • Business inventories rose in June by highest amount since January 2013
  • Mortgage applications remained mostly flat in latest survey as rates remained unchanged
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Thursday, August 13, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/13/15

Please click here to see the edition of BuilderBytes for 8/13/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Productivity grew 1.3 percent in the second quarter of 2015
  • Job openings dropped to 5.2 million in June
  • Wholesale inventories rose more than expected in June
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Tuesday, August 11, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/11/15

Please click here to see the edition of BuilderBytes for 8/11/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Employment rose by 215,000 in July as unemployment rate remained unchanged at 5.3 percent
  • Consumer credit rose in June by 7.3 percent
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Friday, August 7, 2015

BuilderBytes' MetroIntelligence Economic Update for 8/7/15


Please click here to see the edition of BuilderBytes for 8/7/15 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Announced job cuts soar to over 100,000 in July, with half attributed to U.S. Army reductions
  • Initial unemployment claims rise by 3,000 in latest report
  • Mortgage applications rise 4.7 percent in latest survey as rates dip
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.