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and a dearth of skilled construction labor are adding to the shortage. Looking forward, demand for hous- ing over the next 10 years will provide excellent downside protection and drive real estate performance to the next level. Since the 2008 recession, we have enjoyed a low-interest-rate environment that has stabilized the economy and the job market. Housing prices have increased while mortgage underwriting and general liquidity have improved. This has happened while demographic drivers have remained fairly constant. The 10-Year Demographic Game-Changer A Mortgage Bankers’ Association (MBA) survey released in July 2015 concluded demographic shifts alone over the next 10 years will account for a net increase in housing demand of at least 1.3 million units per year. The cohort of 88 million Millennials aging and forming families will not only account for this increase in housing demand but also will continue to change the balance between home ownership and home “rent- ership.” From the mid-1970s to 2008, home ownership traditionally had been around 66
Why Invest in Single-Family Property? And Why Now? S ince the market peaked in 2006 and crashed in 2008, prices have stabi- accounted for 6 percent of sales. Housing Inventory Remains Very Limited, Relative to Demand
2001 level, but remains 18 percent beneath where it was in 2005-2006. • Price-to-income ratio is also higher than 2001 by 28 percent, but is 12 percent beneath its level in 2005-2006. • Relatively tight lending conditions are keeping the mortgage transaction share low at 68 percent of all sales, which is 15 percent beneath 2001 and 12 percent lower than 2005-2006. • Flipping represents 4 percent of sales in today’s market, in line with 2001 but lower than 2005, when flipping
lized and in many U.S. metros have re- versed much of their previous declines. Recent research by Realtor.com exam- ined certain red flags that caused the 2005-2006 housing crisis and compared them to today’s real estate market. In 2005-2006, price-to-rent ratio, price-to- income ratio, the number of mortgage transactions and housing flipping were all outside historical norms. • As of 3Q 2016, the home price-to- rent ratio is 12 percent above its
For a variety of reasons, general hous- ing inventory has not recovered from the 2008 recession and will continue to underperform demand for the foresee- able future. In particular, new-construction hous- ing inventory has struggled—and is ex- pected to continue to underperform— due to higher land costs and a lack of parcels to develop in highly desirable areas. High regulatory and labor costs
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