Posted at: 2011-02-21
The economic downturn has affected homeownership — fewer people qualify for loans even as home prices have declined, and those declining values have made some buyers wary of entering the market. And other trends could have an even greater influence in swinging people away from ownership and toward renting.
Both the current generation of young professionals — Generation Y — and aging seniors are looking more at renting as a way to live where they want to, with the services or entertainment they want nearby. They can easily leave on vacation or pack up to take a promising job in another state without the headaches that come with homeownership.
But don't assume either group is going to settle for your basic apartment of 20 years ago. Instead, they are demanding more amenities that suit their lifestyles, whether it be a child-care center next to the laundry room, an eco-friendly building, or an apartment with two master suites, experts say.
While construction in Ventura County has taken a significant hit since the downturn began, shedding about 7,700 jobs from June 2007 to June 2010, the pain has been uneven.
Single-family homes have been hit hard and condominiums even harder, said Dawn Dyer, president of Dyer Sheehan Group, a Ventura real estate consulting firm.
"There is certainly more scrutiny and consideration from the average consumer before jumping into purchasing a home," she said. "People are much more cautious."
While apartments struggled with a decline in occupancy and lower rents, they came through the crisis fairly well, despite competition from homes rented out by people who couldn't afford to sell them.
Apartments remain a "sweetheart" investment, Dyer said.
Activity hasn't picked back up to where it was in 2007, but 2010 was a good year for apartment sales — up nearly 90 percent from 2009, according to Dyer. She said she receives about three e-mails a day from banks, financial institutions and others looking to invest in multifamily loans.
"It's really viewed in today's world by financial markets as the safest type of real estate investment," she said.
The National Multi Housing Council, an association of the country's large apartment firms, reported rising demand for apartments was creating fewer vacancies and higher rents. That was bringing in more investors and creating greater access to equity capital in the past three months.
"The consensus forecast is for moderate economic growth this year, which should provide additional support to the apartment market," the council's chief economist, Mark Obrinsky, said in a statement.
He said rising demand for apartments reflected the drop in demand for homeownership.
Dyer has seen developments previously approved as condominiums now being considered as apartments.
That's not unusual. Essex Property Trust Inc., which owns several apartment complexes around Ventura County, announced in December that it had acquired a 250-unit project in Anaheim that had been built as condominiums but later leased out as rental property by the seller.
It was one of two condominium communities Essex purchased in December. At the time, the company's chief executive officer said Essex would manage them as rental communities but had the ability to convert them back into condominiums and sell them when the market recovered, "increasing their return potential relative to traditional apartments."
The Multi Housing Council reports that a third of Americans rent their housing and more than 14 percent live in apartments.
In the latest data from the U.S. Census Bureau, more people are choosing to rent. The nation's homeownership rate was 66.5 percent in the fourth quarter of 2010, down from a high of 69.2 percent in 2004.
In the fourth quarter of 2010, there were 1.1 million more renter-occupied households in the United States than a year ago, compared with 30,000 fewer owner-occupied households, the Census Bureau reports.
Meanwhile, data from the California Economic Forecast's most recent report shows several development projects in Ventura County, including those for apartments, have been on hold since the housing downturn.
"Growing demand against the backdrop of the lowest apartment (construction) starts in 40 years — barely enough to offset the units lost to demolition and obsolescence — will result in further tightening in the apartment sector in the near term," Obrinsky said in the statement.
In Ventura County, where home costs remain high despite improved affordability, many professionals rent. Jeremy and Tiffany Cooper looked at houses, even got preapproved for a loan, when they first moved to the area about two years ago, but they decided the prices were too high.
The couple and their 9-month-old daughter live in a one-bedroom apartment in Camarillo close to their church, where they're involved in the student ministry. Jeremy Cooper also works in town.
"We could afford something, but it would be small and rundown and take a lot of my time to fix," he said. That's time he doesn't have, with a baby and involvement in the church.
Besides, there are perks to renting. When water from the upstairs apartment flooded his bathroom ceiling, Jeremy Cooper said it was nice to not be the one worrying about replacing the drywall. Tiffany said she likes having the water paid for, and their other utilities expenses are low.
Alexis Andrews said he would prefer to own a home, but the economy combined with a divorce and a large family took a toll on his credit and finances. He had shared a home with a roommate but just moved into an apartment in Camarillo so he could be near his children's school, have a pool for them and enjoy the privacy of their own apartment.
He said in an e-mail that the decision to rent the apartment was based on "a combination of price, location and amenities to bridge from today to having a better tomorrow hopefully as a homeowner again."
Demographic shifts are favorable toward apartment dwelling. Dyer talks about how Generation Y members tend to stay single longer, delay having children and seek out housing that puts them near work and play. Meanwhile, aging seniors want housing without maintenance and yardwork. It's called a "lock-and-leave" situation.
But these apartment-dwellers often want more amenities than a clubhouse and pool. That's one reason there's such interest in building new apartment complexes from the ground up, Dyer said.
"The real savvy investors and owners realize the need to design the product to meet the needs of this next generation," she said.
Wired for high-speed Internet is crucial, she said. Units may offer two master suites for two unrelated people sharing an apartment, a laundry next to a business center and child care center, green technology or shopping nearby.
Archstone, which owns several properties in Ventura County, allows residents to sign their lease, pay their rent, make service requests and other activities all online. That can appeal to a generation more comfortable with texting and e-mail.
By Allison Bruce, Saturday, February 19, 2011