Real Estate Demographics Research – Rental Rates

Real Estate Demographics Research – Rental Rates

There are many things that could affect the real estate market.  The main factors that forecast the trend in the real estate market are the economy, the population growth, the rates of interest for loans, and the demographics.  In fact, according to a study conducted in 2014, there will be an increase of demand for housing over the next few years.  The reason for the increase in housing demands is the surge of population growth.  Population growth depends on two basic components, natural and non-natural population growth.  Natural population growth is rate of live births that occur in the area.  Non-natural population growth refers to the migration of people in a place affecting the demand and supply for food, housing or other needs in that environment.

Demographics are defined as the study of a population’s characteristic. Age, sex, race, education level, economic status and other factors used by the government and private sectors for many purposes, such as forecasting and identifying the buying capabilities of a population on a regional or national basis.

POPULATION

Real estate researchers have forecasted the surge of population growth.  If the data from the research proves to be true, there are four generations in today’s market on the lookout for housing and two generations play a very significant role in the development of housing demands.  The economic capabilities of today’s population tend to favour more on rental rather than homeownership.  The recession has greatly impacted the demand for owning a property and the demographics show that many people are opting to rent rather than own.  Even property owners who had initially planned to sell their homes are renting them out instead because rental rates and high tax rates are lower for rental investors.

GEOGRAPHIC REGION AND JOB OPPORTUNITES

Since the current market is now recovering from the recession that lasted from 2008- 2011, unemployment rates are going down.  A lot of Americans now find themselves moving or migrating to areas where work is available.  This migration makes a lot of people choose to be practical by renting rather than buying a house.  There are certain cities across the country like Los Angeles and New York where rental rates are surging due to the demand for rental properties.  Even industrialized parts of these cities are transforming into residential areas to accommodate the ever-growing number of young people who want to live there.

AGE

Age is another demographic variable the greatly affects the rise in demand for rentals.  Young people ranging from 18-35 years old are the largest percentage of renters.  Traditionally, these young people would have become first time homebuyers as they advance in their careers.  They are predicated to choose renting versus owning due to changes that happened in the economy (recession, job loss, low-income).  Another reason young adults find renting a more attractive choice is that they don’t feel the need to be burdened with a mortgage loan.  Most young adults believe could not afford to own a house and face the financial obligation that it entails.

Demographics cannot be ignored because it greatly affects, if not, dictates the fate of business investments. The basic rule of supply and demand tells us if there is a high demand for a certain product, the more valuable the product becomes.  If there is a high demand for rentals in an area, the higher the rental rates become.

Demographic Research – Housing Inventory

Demographic Research – Housing Inventory

There are many statistics a real estate investor should pay attention to. One of those statistics is housing inventory. This statistic is commonly referred to as “months of inventory”. A simple definition could be, “The number of months it would take to sell all of the homes currently on the market.” For example, ten months of inventory would signify more of a buyer’s market, meaning more homes to choose from. Whereas four months of inventory would denote more of seller’s market meaning fewer homes for retail buyers to choose from. Knowing this statistic would help an investor tell where the market is and what strategy would be most beneficial.

One of the best ways to research the housing inventory is visiting www.realtor.org. This website is hosted by the National Association of Realtors (NAR). The NAR has an interest in gathering housing statistics so that REALTORS and other real estate professionals can keep their eye on housing movement. At the tops of the webpage you will see a tab entitled “Research and Statistics.” By clicking on this tab you will find many types of statistics including housing inventory.

Another resource to find these statistics is your states’ board of REALTORS website. You can find this website with a quick google search. The state’s Board of REALTORS will also keep tabs on housing inventory to help local real estate professionals. An investor is able to use this information to help in evaluating deals.

The previously mentioned techniques will give you good statistics. If you want local statistics, and you do want local information, you should turn to your real estate professional. A REALTOR who has access to the Multiple Listing Service (MLS) would be able to research housing statistics for an individual neighborhood if you need data as specific as this.  The data from the MLS is much more accurate and local than other resources you will find. Simply ask a REALTOR for the data on the current housing inventory. A good REALTOR will supply you with this information along with other statistics that will benefit your business.

Using the housing inventory statistic to determine the market is important for the investor. If we are in a seller’s market then a buy, fix, and sell strategy would be a good choice. Conversely, an investor in a buyer’s market would be better served using a buy & hold strategy. Therefore, the housing inventory statistic is key to determine the market we are currently in.