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Economic Outlook for Residential Rentals
World and U.S. Economic Outlook
Residential Rental Outlook
minneapolisfed.org
Disclaimer
The views expressed here are the presenter's and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.
Web:minneapolisfed.org
Twitter:@TobyCMadden
Blog:fedgazette Roundup
Gross Domestic Product, trillions of constant 2014 dollars
Source: World Bank, World Development Indicators
Real World GDP(2014 $ in trillions)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
40
45
50
55
60
65
70
75
80
Recovery
Expansion
Record Employment
34 the states are in expansion•7% West Virginia •7% Utah •7% Texas •7% District of Columbia •10% Alaska •10% Louisiana •14% Oregon •30% North Dakota
Share of single-family homes to rental market went from 31 percent in 2005 to 35 percent in 2013
Rental households increased dramatically!
Future of Rental Market
Supply Building Cycles UP for competitor's
Investors Foreclosures are DOWN
Accidental landlords Higher home prices
Hedge funds Slowing down purchases
Future of Rental Market
Supply Building Cycles UP for competitor's
Investors Foreclosures are DOWN
Accidental landlords Higher home prices
Hedge funds Slowing down purchases
More than 90 days past dueJune 2010
More than 90 days past dueDecember 2013
More than 90 days past dueAugust 2014
23
7.7 9.2 10.0 9.0 7.3 6.6 5.8 6.2 6.1 6.1 6.4 6.4 7.6 9.2 8.5 7.7 4.8 3.2
1.0 0.8 1.2 0.5
0.1 0.8 1.7 2.1 0.3
(2.4)(6.9) (8.7) (9.5) (9.8) (10.4)(10.2) (9.1) (9.2) (9.0) (8.2) (9.2) (10.5)
(12.9)(13.6) (13.9)
(14.9)(13.6)
37.5
42.7 46.4
40.9 34.8
30.5 29.3 31.5 30.5 29.5
32.1 31.8 36.1
39.8
36.5 32.9
21.1
13.4
4.2 3.6 5.8
2.5 0.5 3.1
7.6 9.0
0.5
(12.9)
(35.2)
(45.8)
(53.6)
(61.3)(63.8)
(60.8)
(48.7)(49.6)
(47.6)
(42.9)
(48.0)
(54.8)
(71.5)
(79.4) (86.0)
(96.5)
(86.4)
-120
-100
-80
-60
-40
-20
0
20
40
60
Net Investor Absorption Investor Purchases Becoming Rentals
Investor Absorption Metrics3 Month Moving Average
Per
cen
to
f In
vest
or
Pu
rch
ases
Future of Rental Market
Supply Building Cycles UP for competitor's
Investors Foreclosures are DOWN
Accidental landlords Higher home prices
Hedge funds Slowing down purchases
Home Price chart
Future of Rental Market Demand
Demographic shifts Pop growth DECREASING (0.8 to 0.5) Immigrants lower sqft/person INCREASING People of color INCREASING Seniors HOAs INCREASING
Ownership Foreclosures DOWN Wages NOT UP MUCH Financing SOMEWHAT TIGHT
Standards Interest rates
It all adds up to……
Slower growth in property management!!
Questions?
Rent Supply/Demand conditions Supply
Cycles (build - close substitute) UP for competitor's Investors (foreclosures) DOWN Accidental landlords (higher home prices) DOWN Hedge funds SLOWING DOWN
Demand Demographic SLOWING
Immigrants (lower sqft/person) INCREASING People of color INCREASING Seniors (hoas) INCREASING Pop growth DECREASING
Ownership Foreclosures DOWN Wages NOT UP MUCH Financing SOMEWHAT TIGHT
Standards Interest rates
MEANS -> Lower growth in property management demand
30
43.3 43.242.9 42.342.1
42.9
44.1
45.544.4 44.1
44.8
44.4 44.0
41.9 41.740.9
40.2
41.5
43.0
44.6
46.0 46.046.5
45.444.5
42.7 42.5 42.743.5
44.4
46.1
48.6 48.8 48.7
47.4 47.346.8 46.8 46.6 46.3 46.1 45.8
46.7
47.949.1
36.5 35.3 35.6 35.6
36.8 35.7
36.0
34.8 35.6 35.3 35.0 35.2
34.8
35.2 35.1 35.9
36.8 37.1 36.9 36.2
34.6 34.5 33.4 33.0 33.3
34.1
35.4 35.5 36.6 36.5 36.2
35.2 34.8 34.2 34.0 34.1 34.1 33.8 33.9 34.2
35.7 36.8 37.2
36.6
35.0
20.2
21.5 21.5 22.1
21.1 21.3
19.9 19.7 20.0 20.6 20.2 20.4
21.2
22.8 23.2 23.2 23.0
21.4
20.1 19.2 19.4 19.5
20.1
21.6 22.2
23.2 22.1 21.8
19.9 19.1
17.7
16.3 16.4 17.1
18.7 18.6 19.1 19.4 19.5 19.5
18.2 17.4
16.1 15.5 15.9
0
10
20
30
40
50
Current Homeowner First-Time Homebuyer Investor
Homebuyer Participation3 Month Moving Average
Per
cen
to
f B
uy-
Sid
e T
ran
sact
ion
s
31
44.2 44.6 45.5
44.6 44.1
42.3 41.8
41.0 41.7 41.3 41.4 41.6
42.5
44.4 43.6 43.6
41.6
40.3
37.9 37.0
35.8 35.1
33.5 33.8
35.0
36.2 35.8
33.1
29.6
27.8 26.7
25.4 24.4
23.9 24.9 24.9 25.1
25.6 24.7
23.7 22.8 23.2 23.3
21.7 21.4
36.5
35.3 35.6 35.6
36.8 35.7 36.0
34.8 35.6 35.3 35.0 35.2 34.8 35.2 35.1
35.9 36.8 37.1
36.9 36.2
34.6 34.5 33.4
33.0 33.3 34.1
35.4
35.5 36.6 36.5 36.2
35.2 34.8 34.2 34.0 34.1 34.1 33.8 33.9 34.2
35.7 36.8 37.2
36.6
35.0
0
5
10
15
20
25
30
35
40
45
50Distressed Properties First-Time Homebuyers
Distressed Property Supply and Demand Drivers3 Month Moving Average
Per
cen
to
f B
uy-
Sid
e T
ran
sact
ion
s
37
Midwest price to rent ratio at historic highs; US ratio high
38
Overall farm real estate debt up
