Recently Forbes Real Estate Council posted an article, titled, Four Trends that Will Impact Rental Markets in 2018, and we have included the full text below. The article below seems to be written by Nathaniel Kunes with AppFolio, which is a property management software. We enjoy comparing national trends to what we are seeing here in the Boise and surrounding areas. One thing for sure, Boise seems to fit their #2 and #3, which are population shifts, affordability, and hot markets.
1. Occupancy Rate Fall and rent Growth Slows:
Even though we don't consider Boise a major metropolitan area, we're still finding the Boise market to be hot. This article talks about most areas within the US, especially single family rentals, slowing with falling occupancy rates. We must admit, that January has been a very slow month for single family rentals here in Boise, but we do not believe this is due to any negative market trend. Historically Boise rentals, especially single family rentals are much more difficult to rent in the winter months. When it comes to single family homes, it's best to have leases expire outside the school year. People just don't like to move while their kids are in school. Click here to view the SW Idaho Chapter of the National Association of Residential Property Managers 4th quarter rental market update.
2. Population Shifts and Affordability Reshape the Landscape:
According to this article, there are two things that drive the rental market - population shifts and affordability. Boise's population and job growth continue to climb and although home and rent prices also continue to rise, their still considered very affordable in comparison.
3. Hottest Market Opportunities:
Boise fits their definition of a hot rental market because of the job and population growth. According to this article investors looking to expand their properties should consider regions like Boise.
4. Tech Disruption:
Technology was late to getting to property management, but it's here now and moving at a rapid pace. It will surely play a role. Let's be real, technology is expensive and unfortunately I think we'll see further considaton of property management companies which I think long-term, will hurt the non-institutional investors.
Nathaniel Kunes, Forbes Councils
As we embark on 2018, there is a multitude of changes and trends in the real estate market that will impact all aspects of the rental industry, and it’s important for real estate professionals to explore them. From investors keying into market growth areas to property managers making adjustments to meet tenant expectations, creating strategies that align with market trends will lead to greater success in 2018 and beyond.
1. Occupancy Rates Fall And Rent Growth Slows
Rent demand, while hot in major metropolitan areas, is actually slowing in most areas of the United States, especially in single-family rentals. Where we’ve been seeing 6–8% growth in rental prices in years past, we’ll see that trajectory stall out, eventually nearing historical rent growth average (around 2%). Much of that may have to do with falling occupancy rates, which often result from increased supply in some cities as construction catches up. There is also a pent-up demand for moving as many people have been in their current rental much longer than historical trends.
With less demand, property managers will need to get more aggressive about attracting and keeping renters.
To attract residents, smart marketing is critical. Investing in automated vacancy posting syndication and moving marketing spend to areas with the highest returns are sure-fire ways to be certain posts gets attention, and quickly.
It’s also important to differentiate when trying to fill vacancies. Through unique perks or amenities, property managers can not only attract more renters but also target specific segments of renters through the amenities they offer. For example, if in a market that caters to younger generations, property managers should consider adding common areas throughout a building to inspire a sense of community, something that millennials and Gen Z value.
However, cool amenities alone won’t keep the renters. Retaining them requires meeting tenants’ needs and expectations. Having systems and the appropriate technology in place to handle maintenance requests immediately can dramatically change tenants’ perceptions of their living situation and make them more likely to renew a lease. Offering excellent and quick service is essential in keeping renters happy.
2. Population Shifts And Affordability Reshape The Landscape
There are two things that drive the rental market — population shifts and affordability. As affordability becomes a more pressing issue for many Americans, we will see the government, especially state governments, stepping in more frequently to offer affordability programs and tax credits. There already exist laws in many states that require a certain ratio of every new residential building to provide affordable housing. Additionally, for people who work in expensive residential areas but cannot afford housing there, we’re starting to see local movements and initiatives working to help those people afford to rent or buy housing. In San Francisco, the city is spending $44 million for a teacher housing initiative, enabling teachers to live and work in one of the most expensive cities in the country.
The biggest trend in affordable housing is the shift away from public housing to housing choice voucher programs. This will privatize much of the affordable housing stock and require a greater number of property managers to understand and be able to manage affordable housing programs. There is also a lot of compliance involved in both affordable and rent-controlled housing, so, if not an expert in this type of housing, investors should look to a specialized property management company to manage this kind of property.
Demographic shifts will also reshape parts of the real estate landscape. An increasing trend for baby boomers and the empty nester population is to actually move out of the suburbs and into urban environments, often choosing to rent instead of buy. This has dramatically changed the profile of the modern renter to one that spans age demographics. It’s important for property managers and investors to take into account both the older demographics and the youngest demographics (Gen Z) when determining the most appealing spaces, amenities and how to align service with tenant expectations.
3. Hottest Market Opportunities
While we have all heard about the popularity of moving to cities like Nashville — the entire Southeast, in fact, and the Northwest are becoming a popular living destinations for many. After all, hot rental markets tend to follow job and population growth. Investors looking to expand their properties should consider these regions.
Other, non-geographic opportunities are senior housing, affordable housing and commercial. Senior housing, in particular, will be a huge market segment. The population of U.S. adults 65 and over will more than double by 2060, reaching 98 million. That will be nearly one-quarter of the population, a number that reinforces a strong need for senior housing. Taking multifamily complexes and converting them into independent 55-plus communities could be a smart choice for developers and investors, depending on their local senior housing needs.
4. Tech Disruption
The use of intelligent systems, machine learning and AI applications in software will, increasingly, be a huge agent of change in the real estate industry. This disruption will alter everything from property valuation all the way to property management — an area where the use of AI and chatbots can offer tenants better service and automate maintenance workflows.
Consider this scenario: A tenant finds a toilet leaking and can alert management via text. They then receive an automated response from a chatbot communicating next steps, and the tech automatically creates a work order for the vendor.
Voice technology will also become huge in property management, potentially even allowing renters to pay rent by voice and make maintenance requests.
Tech disruption even changes the game in real estate marketing, letting agents use virtual reality to offer prospective tenants a tour of the inside of a home or apartment unit without ever meeting in person.
Ultimately, real estate professionals who are able to act on some of these emerging changes will find greater success. They’ll make more strategic business decisions that align not only with the ever-changing variables of the real estate landscape but also with the evolving set of modern-day tenant expectations, giving them an edge with market competition.
As of January 1, 2018, there are some major tax changes that small businesses and property owners can get excited about! To start the list off is the new Pass Through Tax Deduction. This new deduction, if eligible, can reduce your passive taxable income by 20% right off the bat, and you can take this deduction whether you itemize your deductions or not! There are new rules pertaining to the Section 179 Deduction, as well as decreased tax rates for some brackets. This article does a fantastic job of laying out these new, big changes that are happening in the tax world. Take the time to read it and save some money this coming year!
See Article below and also the link:
How the Tax Cuts and Jobs Act Affects Landlords
The new tax law has some major changes in store for landlords.
By Stephen Fishman, J.D. Share on Google Plus Share on Facebook
The Tax Cuts and Jobs Act (H.R. 1, “TCJA”) has been passed by Congress. Landlords are among the biggest winners under the new law. Virtually all landlords will save money--many, to quote our President, will save “bigly.” Enjoy it while you can.
The main provisions of the TCJA affecting landlords are discussed below. Except where otherwise noted, all of these provisions take effect on January 1, 2018, so they will not affect your 2017 taxes.
New Pass-Through Tax Deduction
For landlords, the most stunningly good provision of the TCJA is a new tax deduction for owners of pass-through businesses. This includes the vast majority of residential landlords who own their rental property as sole proprietors (who individually own their properties), limited liability companies (LLCs), and partnerships. With these entities, any profit earned from the rental activity is “passed through” to the owner or owners’ individual tax returns and they pay tax on it at their individual income tax rates.
Example: Alice, a single person, owns a duplex she rents out. In 2018, she earns a total profit of $20,000. Alice is a sole proprietor. She reports her rental income and expenses on IRS Schedule E. She adds her $20,000 rental profit to her other income and pays tax on it at her individual tax rates. In 2018, her top tax rate is 24%, so she pays $4,800 in income tax on her rental profit.
The TCJA creates a brand new tax deduction for individuals who earn income through pass-through entities (new IRC Sec. 199A). If your rental activity qualifies as a business for tax purposes, as most do, you may be eligible to deduct an amount equal to 20% of your net rental income. This is in addition to all your other rental-related deductions. If you qualify for this deduction, you’ll effectively be taxed on only 80% of your rental income. Thus, the effective rate for taxpayers in the top 37% tax bracket is 29.5%.
This extremely complex deduction goes into effect in 2018 and is scheduled to end on January 1, 2026. All the ins and outs of the deduction have yet to be made clear by the IRS; however, it basically works as follows:
Taxable Income Below $315,000 ($157,500 for Singles)
You qualify for an income tax deduction equal to 20% of your rental income if:
you operate your rental business as a sole proprietor, LLC owner, partner in a partnership, or S corporation shareholder, and
your total taxable income for the year from all sources after deductions is below $315,000 if you’re married filing jointly, or $157,500 if you’re single.
Example: Assume that Alice from the above example had $100,000 in taxable income in 2018. Since she was a sole proprietor, she may take a pass-through income deduction of 20% x $20,000 rental income = $4,000. This saves her $960 in income tax.
This deduction is phased out if your income exceeds the $315,000/$157,500 limits. It disappears entirely for marrieds filing jointly whose income exceeds $415,000 and for singles whose income exceeds $207,500.
This is a personal deduction you can take on your return whether or not you itemize. However, it is not an “above the line” deduction that reduces your adjusted gross income (AGI).
Income Above $415,000 ($207,500 for Singles)
If your annual taxable income is over $415,000 if you’re married filing jointly, or $207,500 if you’re single, you are still entitled to a pass-through deduction of up to 20% of your rental activity income. However, your deduction cannot exceed:
50% of your applicable share of the W-2 employee wages paid by your rental business, or
25% of your share of the W-2 wages paid by your business, PLUS 2.5% of the original purchase price of the depreciable long-term property used in the production of income—for example, the real property you rent.
Since most residential landlords have no employees, the 25% plus 2.5% deduction will be of most benefit to them.
Example: Assume that Alice from the above examples earned $250,000 in total taxable income during 2018. She has no employees in her rental business. Thus, her pass-through deduction is limited to 2.5% of the purchase price of the long-term property she uses in her rental activity. This consists of her duplex, which she purchased five years ago. Her depreciable basis in the duplex (purchase price minus value of the land) is $100,000. Her pass-through deduction is limited to 2.5% x $100,000 = $2,500.
The 2.5% deduction can be taken during the entire depreciation period for the property, which is 27.5 years for residential property. However, it can be no shorter than 10 years.
Increased and Expanded Section 179 Expensing
A provision of the tax code called Section 179 enables rental business owners to deduct in one year the cost of personal property used in a rental business, such as furniture and appliances. During 2017, the maximum amount that can be deducted under Section 179 is $500,000. Starting in 2018, the Section 179 maximum is increased to $1 million. The $1,000,000 amount is reduced (but not below zero) by the amount by which the cost of property placed in service during the year exceeds $2,500,000.
One significant limitation on Section 179 is that is has never been available for rental property owners to use to deduct the cost of personal property used in residential rental units. In a major victory for landlords, the TCJA eliminates this restriction starting in 2018.
100% Bonus Depreciation Through 2022
Currently, business owners may deduct in a single year up to 50% of the cost of personal property they purchase for their business. The TCJA increases this amount to 100% for property acquired and placed into service from September 27, 2017 through December 31, 2022. Moreover, 100% bonus depreciation would apply for the first time to both new and used property, instead of new property only. The bonus depreciation amount will be phased down in 2023 and later years as follows:
80% for property placed in service during 2023
60% for property placed in service after during 2024
40% for property placed in service during 2025
20% for property placed in service during 2026
0% for 2027 and later.
Bonus depreciation may not be used for real property, except for real property improvements such as landscaping or grading, and other components that have a depreciation period of 20 years or less. Thus, landlords may not use it to deduct the cost of their rental buildings or major building components. However, landlords can use bonus depreciation to fully deduct in one year the cost of personal property they use in their rental activity, such as appliances, laundry equipment, gardening equipment, and furniture. But landlords can often do this already under existing provisions in the tax law—for example, the de minimis safe harbor enables landlords to fully deduct in one year any personal property that costs $2,500 or less. Section 179 can also now be used.
Listed property must be used over 50% of the time for business to qualify for bonus depreciation. Listed property includes cars, and entertainment property like televisions and cameras. Computers were classified as listed property as well, but the TCJA removes them from this classification starting in 2018. Thus, bonus depreciation may be used to deduct computers used less than 50% of the time for a rental business.
Landlords Will Not Be Required to Pay Self-Employment Taxes
As you probably know, people who own their own businesses are required to pay Social Security and Medicare taxes on their net business income, as well as income taxes. These taxes are commonly referred to as self-employment taxes. One of the nice things about owning rental property is that rental income is ordinarily not subject to self-employment tax, only income tax. However, there is one exception for landlords who provide substantial personal services to their tenants and are effectively running a bed and breakfast business or hotel, not a normal rental operation.
The House version of the TCJA contained a provision that removed the rental income exemption from self-employment taxation. However, as many tax experts expected, this was dropped from the final version of the bill. Thus, landlords who do not provide substantial personal services to their tenants remain exempt from having to pay Social Security and Medicare tax on their rental income.
Lower Individual Tax Rates
As mentioned above, almost all residential landlords pay income tax on their rental profits at their individual tax rates. The TCJA reduces these individual rates. Starting 2018, the individual tax rates are as follows:
Married Filing Jointly
$0 - $19,050
$0 - $9,525
$9,525 - $38,700
$77,400 - $165,000
$38,700 - $82,500
$165,000 - $315,000
$82,500 - $157,500
$315,000 - $400,000
$157,500 - $200,000
$400,000 - $600,000
$200,000 - $500,000
These rates are scheduled to expire after 2025.
No Deductions for Not-For-Profit Rental Activities
The vast majority of rental activities qualify as businesses or investment activities. However, rentals that are not profit-motivated must be classified as not-for-profit activities, also called hobbies. Under prior law, expenses from a hobby could be deducted as a personal itemized deduction on IRS Schedule A to the extent the exceeded 2% of the taxpayers adjusted gross income. However, such deductible hobby expenses could not exceed hobby income. The TCJA completely removes the personal deduction for hobby expenses. This means that while the income from a rental activity classified as a hobby must be reported and tax paid, no expenses may be deducted.
Mortgage rates are on the rise and experts are expecting them to continue to rise! So what does that mean for our investors?
Buying and Selling:
Single Family and Multi-family sale prices should continue to rise. When mortgage rates increase, the housing supply will decrease. Many people to do not want to downsize/upsize when they will be jumping over a percentage point on their mortgage rate. As a result, it is expected that fewer homes will be put on the market.
Rents should also continue to rise. As homes become less and less affordable, more people will turn to renting which could mean great things for landlords in the near future.
You can read the original article below or by clicking the link:
Mortgage rates jump to the highest point in 4 years, an ominous sign for spring housing
Published 11:15 AM ET Mon, 29 Jan 2018 Updated 23 Hours Ago
A huge sell-off in the bond market is about to make buying a home more expensive. Mortgage rates, which loosely follow the yield on the 10-year Treasury, have been rising for the past few weeks, but are seeing their biggest move higher Monday.
"Bottom line, rate sheets are going to be ugly this morning," wrote Matthew Graham, chief operating officer of Mortgage News Daily. "Some lenders will be at 4.5 percent on their best-case-scenario 30-year fixed quotes."
That is the highest rate since 2014.
The average rate on the popular 30-year fixed started the year right around 4 percent but then began to climb on positive news in the U.S. economy, solid company earnings reports and a shift in foreign central bank policies which appear to now be following the Federal Reserve's tightening of monetary policy. The rate was at 4.28 percent by the end of last week.
"Apart from central banks, there's a ton of bond market supply coming down the pike due to infrastructure and tax bill spending," Graham said. That new supply will send yields and, consequently, mortgage rates higher.
December new home sales fall to 625,000 annual rate December new home sales fall to 625,000 annual rate
While mortgage rates are still historically low, they were even lower in the years following the financial crisis. That not only helped juice the sharp increase in home prices, but it has also given borrowers a new sense of normal. Both will hurt affordability this spring on several fronts.
"Today is one more reason for Realtors and buyers to move up their spring schedule," said Chris Kopec, a mortgage loan consultant at Chicago-based Lakeside Bank.
The housing market is already facing a supply crisis, with demand substantially higher than the supply of homes for sale. Higher mortgage rates will exacerbate that problem because most current homeowners have likely refinanced to rates in the 3 percent range over the past few years and will be reluctant to give those rates up, either to downsize or upsize to a new home. Hence, fewer new listings.
For first-time buyers, even a quarter point difference in mortgage rates could price them out of the type of home they're looking to buy. Today's buyers are saving less, due to high levels of student debt and high rent rates. Confidence in the current economy is driving spending even higher and savings even lower.
"With spending rising faster, what also drove spending was credit card debt as the US savings rate is down to just 2.4 percent in December from 2.5 percent in November and 3 percent in October. September 2005 was the last time it was this low," Peter Boockvar, chief investment officer with Bleakley Advisory Group, wrote in a note to clients. "Lower taxes and higher wages couldn't have come at a better time for the average consumer, but some of that will likely go towards paying down some of the accumulated debt."
Wages may be growing, but the rate is nowhere near the now-nearly 7 percent annual home price growth. Price gains are highest on the lower end of the housing market, where demand is highest and supply is lowest. That is also where buyers are most sensitive to mortgage rates because they are already squeezing to make the monthly payment.
The Southwest Idaho Chapter of Narpm just completed its 4th quarter Vacancy Survey. The resutls show a slight increase in vacancy but rental rates are still going strong. The overall vacancy for the treasure valley is still pretty low compared to past years. The market is still allowing for rents to be pushed a little higher with out causing a vacancy spike.
FRPM has showed on average .5% vacancy for most of the 4th quarter. This is due to FRPM not having leases expire in the winter months. FRPM has found that it can be more difficult to fill a vacancy in the winter so by not having any leases expire with in that time frame we are not faced with the challenge of vacant units.
2018 should be an interesting year with the market still claiming to be "HOT". Only Time will tell just how high those rents can be pushed while vacancy remains low.
Read the full report here: SW Idaho Narpm Vacancy Report Quarter 4 2017
This PetScreening platform provides property managers with the resources to be able to easily review, approve, and track their renters' pet profiles. The sign up instructions are user friendly and easy to follow. For pet owners, this provides a secure pet management system to store and share their pet's profiles and records electronically. These records are transferable between dog-friendly hotels, veterinarians, groomers giving these vendors easy access to vaccinations, allergies, or behavioral history.
Pets are rated on a scale of 1-5 "paws" based off of their vaccination history, behavioral history, and breed and/or size. This helps property manager to be able to make a secure and informed decision to allow pets in the unit. The owner is able to feel confident that their properties are being taken care, it will reduce the cost of repairs when the tenant moves out, and ensure that the pets in the unit are low risk to surrounding tenants.
Read Full Article - Click Here
Today, property managers and landlords have very little insight into the legitimacy of their tenants’ pets. There’s very little information – let alone consistency – gathered on a potential renter’s pet.
Let’s say you own an investment property, and it’s been occupied by a nice renter with a labrador retriever – which you approved via email – for the past few months. One day, you make a scheduled visit to the house to complete some routine maintenance, you notice that the lab that was mentioned looks an awful lot like a pit bull. At this point, not much can be done.
Potential renters lie on applications because they don’t want to be turned down, and more times than not, they vouch for their pets over the phone or an email. So as the property manager, the approval process – all based on trust – is susceptible to inconstancies, lacks concrete data, and is difficult to re-trace correspondence months down the line.
Now let’s say your nice renter’s dog has an unfriendly temperament and bites someone on your investment property. In most cases, the dog owner will get sued – but it doesn’t stop there. The property owner and the property manager may also face suit.
John Bradford, who built his property management business – Park Avenue Properties which specializes in management for single-family homes – to be one of the largest in the Southeast, experienced this first hand.
“In 2015 and 2016, my company was sued twice over pet bites. And these were properties that we inherited with tenants already in place and they had pets already in place,” Bradford said.
His company essentially did nothing wrong as they didn’t place the tenants nor the pets, but as they were the property manager at the time of record, they were responsible.
Around this same time, while at a conference in March of 2016, Bradford heard the assistant deputy director of HUD give a presentation on this very issue. The majority of the industry was trying to figure out how to best operate in this gray area. So, Bradford recognized this was a huge issue.
“It was in that room that I looked around. I said, ‘I’m going to go build a product to help address this,’” Bradford said. “We need to bring some consistency, standardization, and some help on the assistance animal side too, and if I can bundle that all up in a product – I think other people like us will love it.”
Thus, PetScreening was started.
Bradford’s goal was to get a quality product up, tested and into the market as fast as possible, so he partnered with Castle Digital Partners – a local venture service firm – to make it happen.
The product benefits both the property manager and the pet owner.
For the property manager, PetScreening simplifies the pet screening process and puts structure around the pet information collected.
Bradford calls it the ABCs: affirmation, behavior, and compatibility.
When a pet owner completes a pet profile for a property rental application, he/she will affirm the accuracy of the information and understanding of the implications regarding bites and property damage. The owner will also describe the pet’s past and current behavior as pets’ temperament can vary based on breed, development, age, etc. Lastly, the pet profile will illustrate the compatibility of the pet in relation to the asset owner’s pet policy – type and breed restrictions, size limits, etc.
Simply, the PetScreening platform gives property managers an easy way to review, approve, and track their renters’ pet profiles.
There’s added benefit for pet owners, as they can leverage PetScreening as a secure pet management system to store and share their pet’s profiles and records electronically. So whether they’re going on vacation and need to share information with a dog-friendly hotel or hiring a new groomer who wants more details about the pet, they will have easy access to the pet’s profile.
In April of this year, PetScreening beta-tested with Bradford’s property management company, and after a few months of learning and working out user-experience bugs, they opened the product to the public. Bradford and the PetScreening team have designed the platform to have a simple sign-up system, so managers and pet owners can easily and quickly create an account without any handholding.
So Bradford, having built and grown a successful property management company, is more than ready to do the same in the tech space with PetScreening, while helping alleviate the pet gray area for as many as possible.
He’s also a husband, father of four, and is serving his second term in the NC House of Representatives for District 98, so his pursuit of entrepreneurship is the result of his desire to solve problems.
“If you have the entrepreneurial spirit, you just have to make the jump at some point,” Bradford said.
So his advice to aspiring entrepreneurs is: “Take the jump.”
With memories of the great recession continuing to linger in the corners of peoples' minds, many people speculate Boise is headed for a housing bubble in 2018. This article discusses this possibility providing statistics, figures, and their implications. Click here to view. In January 2011, housing prices bottomed out immediately affecting supply of homes for sale in Ada County. Today, we are still seeing prices driven higher and higher due to this limited supply paired with increasing demand. This speculation is fueled by much different circumstance then the housing crisis back in 2008.
In the past two years alone, Ada County has been averaging 8% year-over-year median sales price growth. Median home prices in Ada County ($270,000) are on the lower end of the Western US median price ($362,700). Eventually this price surge will slow down to become more sustainable, until then prices can rise to an additional 10-20%.
Read Full Article Below or Follow Link
By: Lisa Kohl on Thursday, November 9th, 2017 at 4:28PM
I meet a lot of people in my line of work. When people hear I’m a real estate agent one of the most common questions I get, "Is Boise in a real estate Bubble?" Considering local home prices have jumped over the last six years and memories of the great recession are still in the back of everyone’s mind, it doesn’t come as too much of a surprise.
There is a difference between a real estate slowdown and a housing bubble. So what is a bubble? “A run-up in housing prices fueled by demand, speculation and exuberance."
They start with high demand and limited supply which is the case with any rising market. But then, "Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices” (quotes from Investopedia.com)
The green line tracks Supply since prices bottomed out in January of 2011. Today, high demand coupled with a shrinking supply are driving prices higher, not the speculation we saw 14 years ago.
Speculation, fueled by bad loans, drove prices up artificially. Many of the purchases at that time were second, third or fourth properties. A good part of the financing was based on low or no down payment loans with a complete disregard for incomes and credit scores. Today, the majority of the demand is from real buyers who intend on living in the property. To get a home loan- a down payment, credit history, and income are required. Investors are making only a small part of real estate purchases.
When we saw prices peak ten years ago, real estate was much less affordable than it is now. In 2005 people were paying more for less. Today, for $1,000 a month (with 10% down at 3.90%) you can purchase a $236,000 home. In 2006 the average mortgage rate was 6.41%, that same $1,000 would allow for $178,000 home purchase.
In its simplest form, real estate market demand is driven by population. In Ada County, the population has increased by 25.27% from 2005 to 2016. In Meridian alone, the population grew by over 81% in the same timeframe. That is a lot of new demand.
In both the Ada and Canyon County real estate markets, home affordability is close to its long-term average. Low supply and high demand will continue to be the primary factors pushing prices higher. Include the Treasure Valley’s strong job growth and inbound migration and it’s the perfect recipe for higher prices.
Where are prices headed? The truth is no one really knows. If someone says otherwise, hold your nose and walk away quickly.
The best predictor of future price increases, or decreases, is the supply of homes for sale. Currently, we are averaging about 2 months’ worth. Four to six months is typically considered a balanced market. Unless that changes overnight we are looking at high single to double-digit prices increases over the next twelve months.
Over the last two years, we have been averaging 8% year-over-year median sales price growth. Historically, real estate appreciates at 3%-4% per year and we will return to those levels at some point.
“New Normal” is a term that gets used way too often. If anything, the new normal is we won’t continue to sell at a discount to other cities our size. We still have some of the lowest home prices in the Western US median price, $362,700 (existing homes). The median home price in Ada County is $270,000. It's $317,122 in Colorado Springs, $334,437 Salt Lake County, $380,000 in Multnomah County (Portland), $630,000 King County (Seattle).
There are no signs that we are in any type of a real estate bubble. Price increases will slow down to a more sustainable level at some point (a good thing) and will even drop slightly. In the meantime, values can rise an additional 10 to 20 percent.
October 2017 Boise ID market summary:
- The median list price decreased to $249,250 (up 8.37% from 12 months ago)
- The median sold price decreased to $246,950 (up 7.39% from 12 months ago)
- Total home sales dropped to 458 (up from 432 12 months ago)
- Median days on market rose to 15 days (down one day from 12 months ago)
- Available homes for sale declined to a 1.41 months supply (down 9.45% from 12 months ago)
- 30-year mortgage rates declined to 3.90% (up from 3.47% 12 months ago)
Over the past few years, the "buzz" has all been about the increasing demand to rent with a somewhat negative undertone due to skyrocketing rents. Our tenants may find this article refreshing, click here to view. Some of the reasons why renting has become more and more in demand are also cited within the article. These reasons include: saving for a down payment, costs of repairs, property taxes, interest on your loan, and closing costs. They state, " On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation, because property appreciation is highly correlated with gains in the traditional financial asset classes of stocks and bonds," wrote study co-author Ken Johnson of FAU's College of Business, in a release quoted on MSN. When you assume that those monies are reinvested at a rate of return, renting, on average, wins in terms of wealth creation," Johnson said. "Of course, many renters will not reinvest those monies and will instead use them for consumer goods, which is the least desirable option in terms of building wealth."
In the past, on average home owners have had a substantially higher net worth than renters. Home ownership has been regarded as the best way to acquire wealth, but this study shows that times are changing. The housing market follows trends of the stock market. This article explains how it may be in an investors best interest to put money into traditional stocks rather than a home.
Read full article below
By:Nov 29, 2017
First, owning a home is expensive. There's a mortgage — which, in the early years, is more taxes and interest than actual equity (i.e. the first few years of owning a home is also throwing a lot of money away; I broke down my actual mortgage payment in this post, if you're interested in reading more about that). But also, homes cost a lot of money to maintain. When the air conditioner breaks, that couple grand is on you now, sis.
Second, depending on where you live, it can cost a ton of money just to get into the house hunting game. You'll have to spend years putting cash away (while you're still renting) just to afford the down payment and closing costs on your one-day money pit of a house and mortgage.
But renters-turned-first-time-homeowners still make it happen every day. They do all of those things — saving money for a down payment, and "throwing away money" into taxes and insurance — in order to own a home of their own. The idea is that a house is an investment, and a means for building wealth as property values rise. In 2016, the median net worth of a homeowner was $231,400, compared to just $5,200 for a renter, according to the Federal Reserve.
Except... lifetime renters actually have the opportunity to be wealthier than their homeowner counterparts, if they play their cards right.
How Renters Can Come Out on Top
According to a recent study conducted by Florida Atlantic University, Florida International University and the University of Wyoming, you're actually better off investing your money into traditional investments like stocks than into a home. The reason? Well, the housing market usually follows the stock market. If property values are going up, stocks are going up, too.
"On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation, because property appreciation is highly correlated with gains in the traditional financial asset classes of stocks and bonds," wrote study co-author Ken Johnson of FAU's College of Business, in a release quoted on MSN.
"When you assume that those monies are reinvested at a rate of return, renting, on average, wins in terms of wealth creation," Johnson said. "Of course, many renters will not reinvest those monies and will instead use them for consumer goods, which is the least desirable option in terms of building wealth."
The takeaway is this: If a forever renter can sock away all of the money they wouldhave spent on the home buying process (and a broken air conditioner or two) and invest it instead, the renter will come out on top, every time.
As buying a home becomes increasingly out of reach for many in metropolitan areas, more and more people are choosing to rent. Rentberry has developed a website to ensure transparency among applicants, allow tenants the power to set bids on their rent, allows landlords to select higher quality tenants. Landlords post photos of their properties and select their desired rent. Applicants apply and bid on their preferred unit. Landlords are able to select the tenant with the highest qualifications with the highest bid.
While this startup company has only been around for a year, Rentberry's impact on the market may offer some significant housing changes. Critics believe this will take the Bay Area's sky high prices to a new level. Contrarily, CEO of Rentberry believes that through the power of knowing and controlling the rental process, tenants are actually saving money.
See full article and link below.
How much will you pay for your next apartment?
With Rentberry, that all depends — on how much you’re willing to bid. The new real estate website is shaking up the Bay Area’s housing market by encouraging potential renters to bid on homes the way they would on designer handbags or celebrity autographs on Ebay.
Some housing advocates worry that Rentberry — and similar Vancouver-based startup Biddwell, which is set to expand to California by the end of the year — could intensify the existing competition for Silicon Valley’s few available houses and apartments. Critics envision the websites spurring cutthroat bidding wars that will drive sky-high prices even higher, but the platform’s founders say their tenants are actually saving money.
“It’s not about increasing prices,” said Alex Lubinsky, co-founder and CEO of San Francisco-based Rentberry. “It’s all about knowing and controlling the situation.”
But Rentberry’s impact on the Bay Area market may be particularly significant, as buying a home becomes an increasingly unattainable goal for many, and more people choose to rent. The proportion of local renters is up about 5 percent compared to 10 years ago, according to a report by New York University’s Furman Center for Real Estate and Urban Policy.
On the Rentberry website, landlords post photos of their properties, along with the desired monthly rent, and potential tenants then compete openly with each other to float the best offer. The site tells prospective tenants how many other applicants are in the running for each home or apartment, lists the highest offer received so far, and suggests a higher bid. Tenants also bid on a security deposit.
The site launched last year in San Francisco, Los Angeles and New York, and expanded its reach nationwide in April. Tenants pay $9.99 each time they submit an application for housing, and landlords who have more than two properties on the site pay $24 per month. So far, landlords have listed nearly a quarter of a million properties on the platform.
For some housing advocates, who are watching with dismay as ever-rising rents squeeze tenants throughout the Bay Area, Rentberry raises alarm bells. The median rent for a two-bedroom apartment in San Jose was $2,566 in October — up almost 22 percent from January 2014, according to Apartment List. Rent in San Francisco rose by 21 percent during that time period, and in Oakland it climbed 16 percent.
“I think that it’s unfortunate,” Sophia DeWitt, program director for East Bay Housing Organizations, said of Rentberry’s business model, “because any site or option like this that is going to increase or strengthen the speculative market in housing is bad for rental prices. That will just increase the rental prices, and it’s bad for renters.”
On average, tenants using Rentberry pay between 4 and 6 percent below the landlord’s asking price, Lubinsky said — even in the Bay Area. When the site first launched last year, he told the San Francisco Chronicle that landlords could expect to see rental income increase an average of 5 percent. But that original estimate was based on an early beta test of just 10 landlords, he said, and did not end up becoming a larger trend.But Lubinsky swears his platform isn’t raising rents — in fact, it’s doing the opposite, because landlords are not automatically handing the lease to the highest bidder. It’s difficult and costly to evict a bad tenant, so most landlords would rather find a tenant who will stay for years and pay the rent on time, instead of a tenant who signs a lease for more money but stops paying after a few months, Lubinsky said. To do that, Rentberry landlords evaluate a potential tenant’s credit score, renter profile and other qualifications. And tenants can see each other’s information (anonymized to protect privacy), and get a clearer picture of where they stand in the competition.
Greg Rempe says using Rentberry saved him money. The 23-year-old moved from New Mexico to San Jose in June for a job at a startup, and stumbled upon Rentberry while searching for apartments on Google.
He bid on three apartments, but was determined not to enter a bidding war. For each apartment, he chose a maximum price that he wasn’t willing to exceed. One of the landlords ended up accepting his offer of $2,000 a month for a one-bedroom — below the $2,100 asking price, and below some of the other bids. It was more than he was used to paying in New Mexico, but Rempe walked away feeling like he got a good deal.
“I’m assuming it’s because I have a good credit score, but I don’t really know,” Rempe said. “Maybe I got lucky.”
Rempe appreciated the transparency of the bidding process. It was nice to know immediately where he stood in relation to a landlord’s other offers, he said. And after he moved into his new apartment Rempe used Rentberry to set up automatic payments for his rent, meaning he didn’t have to go through the hassle of sending his landlord a check every month.
Rentberry isn’t the only real estate platform that lets tenants bid on their rent. Biddwell operates with a similar model, but with one key distinction — bidding is done confidentially, so prospective tenants can’t see competing offers and try to one-up each other.
“We consciously make an effort to protect against bidding wars,” said co-founder and CEO Jordan Lewis, who helped launch the company in late 2016. “We want to use it more as a tool to facilitate negotiation.”
But that wasn’t always the case. When Biddwell launched the first test version of its platform, it looked more like Rentberry — it used an open system where potential tenants could see and respond to each other’s bids. That bidding process quickly began driving up rents, so Lewis’ team changed their game plan, and hid the bids. Potential tenants now see how many people have made an offer on a property, and if those offers are coming in at, above or below the asking price, but they can’t see individual bids.
As a result, 64 percent of offers accepted on the platform are below the landlord’s asking price, Lewis said.
Matt Regan, senior vice president of public policy for the Bay Area Council, said he isn’t worried about companies like Rentberry and Biddwell wreaking havoc on the local housing market. That’s mostly because the situation is already so bad that these platforms likely can’t do much to make it worse. In fact, he said, the Bay Area’s dire housing shortage means prospective tenants already engage in apartment bidding wars every day.
“This is probably a storm in a teacup,” Regan said, “compared with the tempest that’s swirling around us.”
Below is a blog post from Credit.com stating that single family rentals are developing faster than home purchases and apartment style living. From our point of view, we tend to agree with much of what is stated in this article. However, we do not believe that the Boise market fits the mold described in this article.
We agree that the rental market has surged after the housing crash. However we do not agree that this has been limited to only single family rentals. Boise and the surrounding areas have been building thousands of apartments each year and their finishes are far superior over your typical starter home. Perhaps it was the millennials that started this trend, but we've seen renters from all generations. As we have posted over the years within our own blogs we not only saw the loss of confidence in homeownership but also saw professionals desire to rent due for the flexibility and the ease of using your smart phone to take care of any maintenance needs.
We are not seeing builders in the Boise area building single family homes with the sole intent to rent rather than sell. We do agree that a higher percentage of rentals within a subdivision can have a negative effect, but since Boise and Meridian are building so many luxury apartments, we're not really seeing this affect within many subdivisions
The 3rd quarter SW Idaho Narpm vacancy survey was completed and the results are below.
Melissa Sharone, President
- Boise Area Rental Market
- Boise Area Real Estate market
- Property Management
- Boise Area Real Estate Market
- Boise Real Estate Market
- Boise and Idaho in the News
- Deferred property maintenance
- Rental Property Maintenance
- Fair Housing
- What to expect in the rental market in 2018
- New Tax Plan and You!
- What do Rising Mortgage Rates Mean?!
- 4th Quarter Vacancy and Rental Rates are in
- Pet Screening: How it Benefits You
- Tony Drost
- Kurtis Tarbet
- Jim Sharone
- Melissa Sharone
- Julie Tollifson
- Kristen Curtis
- Tyler Brown
- Tara Pecora
- Marie Swanson
- Lizz Loop