Posts tagged Scott
Peter Linneman, Chief Economist for NAI Global, is widely recognized as one the leading strategic thinkers in the real estate industry.
Peter recently shared his take on the current housing market at a recent NAI Global webinar:
- U.S. does not have excess housing inventory (single- and multi-family), just a lack of household formation. We do not lack people, just new households.
- Total population continues to grow. U.S. currently adding 3 million people per year to national population, & only forming 450,000 households.
- There are 1.5 million households that have not formed based on actual population growth since downturn.
- It used to take 2.4 people to form a new household, now it takes 6.6 people to form a new household.
- 1.4 million excess housing units, 2.1 million unformed households. If all households formed that would be expected to form, we would be 700,000 units short on housing. Therefore, there is net pent up demand for housing units of approximately 700,000.
- People need jobs to feel comfortable to strike out on own & form household (such as renting an apartment).
- Multifamily Housing Stock: Absolute supply is falling. Destroyed 150,000 units while adding only 95,000 units in past 12 months.
- Corporate profits are at all time high, even though they fell significantly in 2008 and 2009. Efficiency is up, and productivity & profits almost match historic highs. 7.4 million fewer workers producing same GDP. What have they done with profits? Cash holdings $3.2 trillion and rapidly rising vs. historic norm of $1.2 trillion.
- Since downturn, U.S. has added 1 million jobs, lost 10 million. U.S. will probably add 3 million jobs each year for next 3 years.
BOTTOM LINE: There is pent up demand for housing in general & a shrinking unit supply. As corporations begin to use cash to add jobs (and increase productivity), multifamily fundamentals should rebound dramatically. Transparent cash flows & “mark to market” rents will make multifamily the preferred asset class for commercial property investors.
For more information about the West Michigan multifamily market, or for a free property evaluation of your apartment communities, please contact Scott Nurski or Craig Black at (616) 776-0100.